Finance and Constitution Committee

Wednesday 23 September 2020

Session 5

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Wednesday 23 September 2020

CONTENTS Col. DECISION ON TAKING BUSINESS IN PRIVATE ...... 1 UNITED KINGDOM INTERNAL MARKET BILL ...... 2 TRADE BILL ...... 27

FINANCE AND CONSTITUTION COMMITTEE 21st Meeting 2020, Session 5

CONVENER *Bruce Crawford (Stirling) (SNP)

DEPUTY CONVENER *Murdo Fraser (Mid Scotland and Fife) (Con)

COMMITTEE MEMBERS George Adam (Paisley) (SNP) *Tom Arthur (Renfrewshire South) (SNP) *Jackie Baillie (Dumbarton) (Lab) *Alexander Burnett (Aberdeenshire West) (Con) *Angela Constance (Almond Valley) (SNP) *Patrick Harvie (Glasgow) (Green) *Dean Lockhart (Mid Scotland and Fife) (Con) *John Mason (Glasgow Shettleston) (SNP) Alex Rowley (Mid Scotland and Fife) (Lab)

*attended

THE FOLLOWING ALSO PARTICIPATED: Professor Michael Dougan (University of Liverpool) The Rt Hon Greg Hands MP (Minister of State for Trade Policy) Dr Emily Lydgate (University of Sussex) Ivan McKee (Minister for Trade, Investment and Innovation)

CLERK TO THE COMMITTEE James Johnston

LOCATION Virtual Meeting

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Scottish Parliament United Kingdom Internal Market Bill Finance and Constitution Committee 09:01 Wednesday 23 September 2020 The Convener: The next item on our agenda is to take evidence on the UK internal market from Professor Michael Dougan, who is professor of [The Convener opened the meeting at 09:00] European law and Jean Monnet chair of European Union law at the University of Liverpool, and Dr Decision on Taking Business in Emily Lydgate, who is a senior lecturer at the Private University of Sussex law school. I warmly welcome both our witnesses. The Convener (Bruce Crawford): Good I remind members to direct their questions to a morning, and welcome to the 21st meeting in 2020 named witness. If either of our witnesses wants to of the Finance and Constitution Committee. I have add something to the other’s response, they apologies from Alex Rowley and George Adam. should please request to speak using the chat The first item on our agenda is to decide function. whether to take in private at future meetings We will go straight to questions from the consideration of a draft report on the legislative committee, and I will start. The Public consent motion on the United Kingdom Internal Administration and Constitutional Affairs Market Bill. Do members agree to take that in Committee at Westminster has said that the private? proposals in the internal market white paper to set I see no disagreement, so that is agreed. in law the principles of mutual recognition and non-discrimination “will effectively create new reservations in areas of devolved competence.” Professor Dougan, in your written submission, you state that, although “on paper, devolution might continue to look the same”, and “might even look more extensive ... in practice, the operation of the UKIM has real potential to limit the capacity of the devolved institutions to pursue different economic or social choices from those made in London.” I ask both witnesses to explain why devolution can simultaneously appear to look more extensive and more constrained. What is the reality? Professor Michael Dougan (University of Liverpool): Thank you for the invitation to participate. It is helpful to explain the distinction between the situation on paper and that in practice by pointing out that that is how many internal market rules operate. That is most certainly true in the EU context, which is the internal market with which we are most familiar. On paper, the devolution competences will not particularly change as a result of the United Kingdom Internal Market Bill. Obviously, there is a new addition to the list of reserved competences, in that the act will be added to the list of provisions that cannot be modified by the devolved Parliaments. However, it looks as though the other devolved competences will remain the same. In

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addition, the UK Government has repeatedly I can probably best illustrate the question of the promised that, after the transition period ends and seemingly paradoxical nature of both giving and the full effects of Brexit become clear, there will be taking powers using the example of post-Brexit an increase in competence for the devolved secondary legislation on the free movement of institutions, because many of the issues that might goods. As Professor Dougan said, the basic previously have been subject to regulatory approach of the EU is that, where harmonisation is intervention by the EU will become more fully necessary to achieve free movement, product subject to the competence of those devolved regulation is harmonised and that is managed at institutions. EU level. In the absence of that, a lot of the post- Brexit legislation devolves powers that were In practice, of course, internal market principles previously harmonised. Issues such as the operate by imposing restrictions and limitations on maximum residue levels for pesticides, or new competence exercises, and that is universal. All genetically modified organism authorisations, were internal markets work by establishing a set of managed at the EU level and were harmonised, horizontal principles that seek to at least influence but they are now devolved in secondary and in most cases restrain and restrict the way legislation. That seems to give greater powers to that the competences are exercised in practice. devolved Administrations but, perversely, I think That is definitely true of the United Kingdom that you could say that in practice it might do just Internal Market Bill. By imposing widespread the opposite, due to, as Professor Dougan said, obligations of non-discrimination and, more the asymmetry in the size and market power of the important, mutual recognition, the bill seeks to devolved nations. For example, England might restrict the way that devolved competences authorise a new active substance for pesticides, or operate in practice. a new GMO, and would then be able to freely It is fair to say that there are two main factors export those products to devolved nations, even if that are particularly striking under the United they had controls domestically. In so doing, Kingdom Internal Market Bill. The first is that it is in England could competitively undercut producers effect a cassis de Dijon on steroids. It takes the and in effect undermine permitted divergence. idea of mutual recognition, multiplies and The Convener: The Scottish Government’s magnifies it, and makes it a far stronger principle view is that the UK internal market proposals are of mutual recognition than EU lawyers would completely unnecessary, as common frameworks recognise in the context of the single market. provide arrangements to manage the intersection Secondly, it does not acknowledge the simple of EU law and devolved competence in areas of empirical fact that the UK internal market is unique policy and regulation that are relevant to UK in the world, due to the size of the English internal trade. Do the witnesses agree with that economy and population relative to the size of the view? other participating territories. That means that a principle such as mutual recognition, which might Dr Lydgate: The core of any approach to an operate in a relatively neutral manner in the internal market that is as integrated as the UK’s context of a large organisation such as the EU, will has to be harmonised rules that have a strong joint not operate in a relatively neutral manner in the consultative process underlying them. The rules context of a relatively small number of territories, cannot be set by one of the countries. The EU such as the UK, where one territory is not only provides quite a formalised approach that involves relatively but absolutely dominant over the others. EU bodies—the Council, the Commission and the Parliament—setting regulations that apply to all When you put those two factors together—the member states. The UK is trying to replicate that cassis de Dijon on steroids and the simple, approach with a non-statutory process of setting inescapable, empirical fact of the size of the out common frameworks. If those frameworks are English economy and population—it means that agreed, the scope of the market access principles principles such as mutual recognition will, in will be dramatically reduced. practice, have an impact on devolved competences that makes a real distinction I have a lot of questions about how the common between what exists on paper and what might frameworks process sits in the United Kingdom actually happen in practice. Internal Market Bill, because there would be a statutory basis for the market access principles, The Convener: Thank you. Dr Lydgate, would but not for the common frameworks. There is you like to add anything? probably a role for both. Dr Emily Lydgate (University of Sussex): In There is, of course, a balance between terms of new reservations of powers, specific harmonisation and devolution, and that might concerns arise with respect to subsidies in the involve hard choices in respect of erecting new provision of public funds. market access barriers or allowing products that would not be the regulatory choice of one nation

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for the good of free trade. However, as in the EU, one within the context of the UK’s particular that should be a process that happens around the situation. margins of a broadly harmonised framework. Murdo Fraser (Mid Scotland and Fife) (Con): I would raise specific concerns about how Professor Dougan, I will follow up the convener’s legislation might undercut common frameworks line of questioning and look at the impact of the with respect to trade agreements and trade bill’s provisions on devolved powers and your negotiations. I think that the UK Withdrawal from concerns about how the ability of devolved the European Union (Continuity) (Scotland) Bill Administrations to act might be constrained. How also raises issues in that respect. Perhaps we will could the bill be amended to try to address those come to that later. concerns? Would, for example, the introduction of a provision on proportionality be part of the Professor Dougan: I certainly would not solution? describe the proposals as completely unnecessary. I mentioned in my written Professor Dougan: If we take the submission to the committee why, historically, an fundamentals of the bill as a given and I were internal market has not been much of an issue for seeking to amend it, my amendments would go the UK. When the UK joined the EU and began to much further than simply tinkering with the bill. Let participate in the EU internal market, there was no us take the fundamentals of the bill as they are devolution, so it was not really an issue pre EU and the idea that we will have some system of membership. Devolution happened within the mutual recognition and non-discrimination that context of EU membership and the EU internal applies across broad sectors of the economy and market rules in effect provided a framework to goods and services. If we wanted to make that a regulate not just the EU single market but, in many more attractive proposition from the point of view respects, internal trade within the UK. The of Scotland and Wales in particular, the first thing problem is therefore a direct consequence of that I would do would be to drastically expand the Brexit. system of potential justifications and derogations from the principles of mutual recognition, in We will have a UK with devolved settlements in particular. Scotland, Wales and Northern Ireland, but in which the EU framework that previously helped to regulate trade relations, not just within the EU but 09:15 within the UK, has been taken away. It is a In the EU context, mutual recognition in the genuine problem. absence of harmonisation is only a presumption, I suppose that the main issue is not so much the and a member state can rebut the presumption of common frameworks that are being discussed or mutual recognition because it has higher or better negotiated, but how the economy and society will standards than its peers on any legitimate public evolve in the future. In the EU context, for interest ground. The main grounds are usually example, every time that a member state changes public health, environmental protection and the its product requirements or introduces new protection of consumers, but there are potentially restrictions on alcohol or cigarette consumption, an infinite number of public interest grounds on every time new scientific developments, changes which mutual recognition can be derogated from in technology or changes in consumer preferences under EU law, including the protection of workers, occur, and every time a regulatory regime the protection of particularly vulnerable children, changes, trade implications are automatically the protection of the reputation of national created for all the other member states that want institutions—there is a huge variety of such to do business with that country. It is useful to bear grounds. The first thing that I would do, therefore, it in mind that internal markets are not static. A set would be to significantly broaden the range of of common frameworks is not established and legitimate public interests that were capable of then left for time immemorial. Internal markets rebutting a presumption of mutual recognition. involve constantly managing developments in local The second thing that I would probably do, and national regulation and their impacts on trade particularly from Scotland’s point of view, would be relations with the other territories that are being to argue for a principle of functional equivalence. worked with. In other words, as long as standards are basically As I said, there is a genuine problem, and it the same as each other, and they are not needs some sort of solution. It is fair to say that particularly higher or appreciably lower, they the solution is not the one that I would have picked should be treated as functionally equivalent, so if I had a free hand in designing it. My complaints that the mere technical differences—the simple about the bill are not to do with the fact that there differences in the way that particular requirements is a problem that genuinely needs some sort of are phrased or have to be met—do not become solution to address it; my problem with the bill is barriers to trade in themselves. That is a familiar that the solution is not necessarily a very desirable

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principle in the EU context, but we do not see it in limit their capacity to pursue different economic the internal market bill. and social choices? If the first two things that I would introduce were Professor Dougan: I will answer your question wider justifications for derogation and the principle in two stages. First, I will highlight a of functional equivalence, the third would probably straightforward practical example that clearly be more difficult to achieve other than by my illustrates the potential risks, then I will draw out describing it fairly loosely. It is probably to be some of the key lessons that we can see in that taken for granted that Scotland is not looking to example. lower standards significantly below those that An example that I give in my written submission exist. Fears have been expressed that, in due is about what would happen if the Scottish course, Westminster might well go down Government were to be minded to introduce a ban regulatory diversions from existing standards in a on single-use plastics. To be frank, it could be way that Scotland feels less comfortable with. In almost any measure to protect the environment, or that case, I would argue for a right to free any consumer driver, but that is the example that I movement for Scottish, Welsh and Northern Irish gave. When we work that measure through the goods within England, based on their compliance scheme of the bill, we find that the Scottish with existing minimum standards. In effect, authorities could introduce such a ban and enforce Scotland and Wales would have free access to the it against Scottish producers, but could not enforce English market as long as they meet the minimum it against imported goods from England or Wales. standards that have been agreed by everybody. In the reality of the UK market, the simple fact is That is obviously a much broader proposition, that England has 80 or 85 per cent of the because it would require processes of legislative population and the economy, and has a huge dialogue, and, if not harmonisation, then at least manufacturing base. If Scotland could enforce an understanding of what the minimum standard such a rule only against its domestic producers should be. In effect, however, I do not think that and not against imports from England, it might as Scotland wants Scottish goods and services to be well not have the rule at all. In practice, it would excluded from the English market because the have no means of preventing non-recyclable English market has decided to go down a plastic from flooding its market and being fully and technically different route and the Scottish freely available for sale. All that it would be doing standards remain higher in substance. That would is imposing on its own producers an extra probably be an undesirable outcome for Scotland. compliance cost that they would have to satisfy, Murdo Fraser: I would like to ask Dr Lydgate which would put them at a competitive the same question. disadvantage. That example shows that the bill’s provisions would operate so that Scottish Dr Lydgate: That was a very complete answer producers would be disadvantaged and Scotland and I underscore Professor Dougan’s points. could not deliver on the public interest objective I will propose one additional amendment to the that the regulation was intended to achieve. bill, which would be about the scope of delegated We learn from that example that it is not just the powers. In the bill’s current formulation, the detailed principles that are potentially problematic; Secretary of State can change a number of things the bill’s underlying assumptions strike a balance through secondary legislation, including the types between trade and local democracy, or local of regulations that are covered by the non- autonomy, that many of us who are discussing the discrimination principle, the list of exemptions from bill in academic circles find quite problematic. findings of indirect discrimination, and the overall schedule 1 exemptions for market access The starting assumption for the bill seems to be principles. That all seems to consolidate quite a lot that regulatory divergence by Scotland and Wales of power at the UK level. is a problem; it is not an expression of local democracy or a valid search for different solutions Angela Constance (Almond Valley) (SNP): I to societal problems in Scotland and Wales, but a have separate questions for each of the problem that needs to be managed. That starting witnesses, but I have no doubt that the convener assumption runs throughout the bill’s provisions on will keep me right about time. non-discrimination, and especially on mutual I will start with Professor Dougan. In your recognition. submission, you say that the problem is not that We see it in another way, subtly, when it comes Scotland or Wales want to do things differently; it to the legal effects of the principles of mutual is the risk of magnifying the economic and recognition and non-discrimination. The “constitutional dominance” of England. Can you assumption is clearly that those principles could say first how the bill will, in practice, limit the be directly enforced before the courts, but opportunities for devolved Administrations to primarily against Scotland and Wales. The bill enforce their own laws and, secondly, how it will

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makes no provision to deal with disapplication of caught by the bill and would be subject to its an act of Parliament; it appears that it simply did provisions. not enter the consideration of the drafters of the On your question about whether there is any bill that Westminster might create barriers to trade scope for refusing mutual recognition on broad for Scottish and Welsh goods. The assumption is public interest grounds, that comes back to the clearly that Scotland and Wales will create barriers question that Murdo Fraser asked. In a way, the to trade for English goods. bill is cassis de Dijon on steroids. It takes the idea We can talk about the problem in relation to the of mutual recognition—the very strong principle details of the bill, and of course we should do that, that if something is good enough for the English it but it is also important to recognise the underlying should be good enough for the Scots, and they assumption that characterises the bill. The should have it, too—but it strips away almost all of expression of divergent preferences by Scotland the public interest justifications that would be and Wales is the problem that the bill seeks to familiar under EU law for restricting the sale of address. imported goods unless they comply with its domestic standards. Angela Constance: Thank you for that, professor. So we are not even starting on an even In relation to goods, pretty much the only playing field. exception to mutual recognition involves stopping the spread of pests, diseases or unsafe foodstuffs. Do you have views on whether the United General public health interests are not a valid Kingdom Internal Market Bill discourages justification, and neither are issues around regulatory innovation? Is there any scope in the environmental protection, consumer protection or bill for Scotland to refuse mutual recognition for children’s rights. the sake of broad public interest objectives? For example, the EU single market rules currently Similarly, in respect of services, when it comes recognise public objectives including public health to mutual recognition for authorisation considerations, alongside pure market requirements, the only derogation involves dealing considerations. with a public health emergency that poses an extraordinary threat to human health. Again, there Professor Dougan: I will first answer your are no derogations for environmental concerns, question about whether the bill discourages consumer issues, general health concerns, regulatory innovation. You should bear in mind children’s rights or anything else. There is an everything that I have just said about the fact that extremely limited set of public interest the bill’s impacts, in practice, on many proposed justifications. exercises of devolved competence, in relation to trade in goods or trade in services, would be to Angela Constance: Although there is a lot in penalise domestic producers or traders and to the bill for politicians like me to complain about— remove the ability to enforce the same standards big sweeping powers for UK ministers, reservation against imported goods or service providers. That of state aid and difficulties around mutual means that you would not achieve your public recognition that have been discussed already— interest objectives and would only end up could the bill be repaired? You have spoken about penalising your own domestic producers. The what some of the solutions might be. Does the UK natural consequence of that is that the exercise of Government need to go back to the drawing devolved competences will be discouraged. For board? To me, the bill seems to be a fundamental example, what is the use of Scotland banning attack on devolution as we know it. single-use plastics if the Scottish authorities know Professor Dougan: In response to Murdo that the ban will be totally ineffective in practice Fraser’s question, I identified some reforms that I and will only penalise Scottish producers of suggest should be made if we are to try to work packaging? with what we have been given and to make it It is worth pointing out that the bill offers a better than it is at the moment. I also agree with limited protection for existing restrictions or Emily Lydgate’s observations about the scope of provisions that might cause barriers to trade, but it delegated powers for UK ministers to change the does not apply to any new exercises of devolved terms of the game virtually at will. competence that introduce novel regulatory requirements, or to existing requirements that are substantively—not “substantially”—changed. In my 09:30 written evidence, I give the example of a change in I also said to Murdo Fraser that if I were sitting the calculation of the minimum unit price for down to design a UK internal market, I would alcohol. At the moment, if that rule were to probably have done it very differently. Principles change, it would be protected. However, if Scottish such as mutual recognition and non-discrimination authorities in the future were to decide to change would certainly have a role, but my preference the rules on minimum unit pricing, that would be would have been to have had a system of pre-

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legislative dialogue between the four territories, with respect to food safety and food standards, which would involve them sitting down as equals which is now devolved rather than harmonised. In to discuss the potential impact of regulatory that context, even though the new powers might changes on trade in the UK, and seeking to find not be used, I expect that the UK Government the best solution for that particular situation, based wants the legislation to be in place before those on a range of what I call in my briefing paper the statutory instruments come into force, in case the “toolbox of trade law”. We have a range of common frameworks fall apart. principles, from harmonisation through to mutual What we are seeing is the UK Government recognition, and all sorts of ways to nuance and responding to a threat by trying to centralise power qualify them. or create a system that will function in case there My solution would have been to find pre- is a problem. However, in a sense, that legislative understandings of how to manage the exemplifies the issues that are at play here, which potential trade barriers that might arise from the involve the lack of a strong consultative process. exercise of competences across the UK. If a John Mason (Glasgow Shettleston) (SNP): Dr solution can be found that satisfies everybody, Lydgate, you make the point that the United States everyone can proceed on the bases of that would look at trade negotiations with the UK solution and exercise of their respective differently from the way in which the EU would. competences. However, that means that everyone Could you expand on that a little? There is a lot of just has to live with whatever solution comes out of variation between he different states in America, the process. If it were to mean that there were so I would have thought that that would be a barriers to trade for certain English manufacturers, factor. they would just have to put up with them. That is true in virtually every other internal market in the Dr Lydgate: Is your question about how the world; in virtually every other system, there are United States, as opposed to the EU, manages trade barriers and people just have to live with and internal divergence? adapt to them. John Mason: Yes, in terms of how that will feed If I were redrafting the bill, I would keep bits of into a new negotiation with the UK. it—some of the underlying principles and tools— but I would probably take a radically different Dr Lydgate: The US has a lot of internal approach to how the tools should be employed, divergence, and that is an issue for internal trade. However, its objectives for the UK negotiation are the institutional ways in which that is done, the centralised. In fact, they are set out in legislation— processes and the legal effects. Congress has said in law what the US negotiating Angela Constance: Do I have time to ask Dr objectives will be. Therefore, those are not Lydgate a question? contingent on a Trump Administration or a Biden Administration. Some of the phrasing of the The Convener: I would prefer to let others in at objectives and their strongly unilateral orientation the moment, but I can come back to you, if that is is definitely a reflection of Trump, but the okay. objectives are centralised. Dr Lydgate—perhaps you could give an John Mason: Would those be different from the overview in response to what Professor Dougan EU’s, in that the EU is trying to push up standards has just said. I know that that is a big ask, but is and the US is trying to push them down? there anything particular that you would like to add that would differ from what we just heard? Dr Lydgate: On the substantive issues of what the two parties are looking for from the UK, those Dr Lydgate: I will just make a supplementary are definitely in contrast. The EU has, essentially, comment. In a sense, the process problems with accepted that we will have a fairly basic free trade the bill are the substantive problems. Previous agreement that does not have very much in the witnesses have questioned why the bill was way of regulatory alignment. We do not have a presented with such urgency, given that it does demand to continue any single market, or quasi- not apply to existing legislation, and that legislative single-market-style arrangement with the EU, so it changes in the immediate aftermath of Brexit are is really down to the UK to decide what likely to be small. concessions it wants to make to achieve a trade I have a slightly different perspective on why the agreement. However, if it wants to achieve a trade UK Government might be feeling some urgency. agreement with the US, that implies some At the end of the transition period, on 1 January, a changes to its domestic regulation, particularly on raft of Brexit legislation will come into force. The agriculture. broad understanding is that those pieces of John Mason: Thank you very much. legislation will simply transpose EU law, but in fact they present some dramatic changes with respect I now switch my questioning to Professor to the internal market. I gave an example of that Dougan. You have already touched on the

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question of minimum unit pricing for alcohol, which trade threshold than mutual recognition. Again, it has been a major issue in Scotland. In paragraph gives an indicative list, including 15 of your paper, you talk about action being “the circumstances or manner in which goods are sold” allowed in the bill only against serious health threats. Will you expand on that? Am I right in and requirements relating to transportation and saying that, in the European Union, action against storage. general threats to public health is allowed? The problem is that the bill creates a clear Professor Dougan: I will double-check my distinction between the two categories of rules. notes. In the field of goods, we are dealing with One set of rules comes under mutual recognition the principle of mutual recognition. In my analysis, and another comes under non-discrimination, but I suggest, and most of my colleagues would there is not an exhaustive list to show which rules agree—a few other people might suggest fall into which category. We have to decide which otherwise—that a change in the mandatory category those rules that are not listed as minimum price for a good is a product illustrative examples fall into. specification that would be governed by the Minimum price controls are not explicitly listed, principle of mutual recognition under the bill. In so we have to figure out the underlying philosophy that case, the only justification that would be that distinguishes one group of rules from another available to, for example, the Scottish Government and justifies the very different statutory treatments to enforce its minimum prices against English under the bill. The assumption that we would imports of alcohol would be to prevent the spread make, using our inherited EU law head, is that of a pest, a disease or an unsafe foodstuff. That mutual recognition applies to any rule that would clearly does not apply in the case of minimum unit prevent the sale of a good unless changes were pricing for alcohol. In effect, you would be left with made to its innate or inherent characteristics, or no potential justification whereby the Scottish any rule that would prevent the lawful sale of the Government might enforce a change in minimum good if the requirement was not complied with. It is unit pricing against imported English alcoholic not about the advertising or the shop premises; it goods. is about the good itself. There is no general public health justification It would be completely orthodox, in trade law that would allow any part of the UK to reject terms, to say that insisting that a good must have mutual recognition in the fields in which it applies. a minimum price before it can be placed in the By contrast, under EU law, general public health market lawfully is no different from saying that it considerations are a valid public interest must have recycled packaging or that it cannot requirement. We know that from, for example, the contain dangerous chemicals. Price is such an Scotch Whisky Association case, in which the inherent part of the good that you can align Scottish Government relied on public health minimum price controls with inherent product grounds to justify its policy on minimum unit requirements, such as those relating to packaging, pricing for alcohol. labelling or composition. It is an open question, but John Mason: There was quite a lot in that. in trade law terms it would be completely orthodox Could you explain to me, as a layperson, the idea to make that distinction. of product requirement? When I read those words, John Mason: If a bottle of English beer was I think that that means that a product must have in being sold at the same price as a bottle of Scottish it a certain amount of water or whatever it may be. beer of the same strength, could that be counted However, you are saying that the product as discrimination? requirement could include the price. Professor Dougan: We are talking about Professor Dougan: The bill includes an mutual recognition. indicative list of what will be covered by mutual recognition. I should point out that I am using the John Mason: Right. term “product requirement” because that is the Professor Dougan: If the English beer, having shorthand that we use in EU law. That terminology been lawfully produced, marketed and sold in is not used in the bill. The bill refers to an England, would have a significantly lower price indicative list of rules relating to mutual than the Scottish equivalent, changing its price recognition, which cover physical characteristics, would mean that you were reregulating a product packaging and labelling, production, plant that had already been lawfully placed on the requirements, identification and tracing of animals, market in England. That is what mutual recognition and so on. is all about. The bill identifies a second set of rules relating The underlying idea of mutual recognition is to trading goods that will not be subject to mutual that, if a product has been lawfully placed on the recognition but will be subject to the principle of market in one territory, it should be free for sale in non-discrimination, which is obviously a lower

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every other territory without any further regulatory could be something more cosmetic, such as requirements that limit access to the market. By different labelling requirements. That is an taking that bottle of English beer, which might example of where a harmonised approach is more have been on sale for £1, and insisting that in effective than just having mutual recognition, Scotland it has to be on sale for at least £1.50, you which would allow the proliferation of different are reregulating the beer and imposing an extra approaches. regulatory requirement that has to be complied Dean Lockhart (Mid Scotland and Fife) (Con): with before the beer can be lawfully placed on the I want to come back to the question of how and Scottish market. That type of situation is what when the internal market legislation might apply in mutual recognition is all about. practice. The UK and Scottish Governments have It is unfortunate that the bill does not give us a both committed to common frameworks which, as more definitive list of which rules fall into which we have heard, will cover the vast majority of the category, but in trade law terms that analysis trade in the internal market. Those common would be seen as completely orthodox. frameworks will set out common standards, areas of divergence for devolved regulation and areas The Convener: Before you continue, John, I where it is competent for the devolved see that Emily Lydgate would like to make a Administrations to diverge. comment on that area. Evidence that has been given to the committee John Mason: I would like to put a final question previously has suggested that, in reality, the of Professor Dougan, if I may, and then we can internal market proposals will potentially apply only come back to Emily Lydgate. to a relatively small area of trade that falls outside From what you said, Professor Dougan, if a the common frameworks. In effect, the proposals beer can be sold for £1 in England and we want it will act as an insurance policy or sweep-up to be sold for £1.50 here, that is okay at the mechanism for trade that is not dealt with in the moment, because that is an existing rule, but if we common frameworks. Do you agree that, if and want to put it up to £2, we might be challenged in when the common frameworks are in place, the the courts. internal market legislation will in reality apply to a relatively small element of trade in the internal Professor Dougan: Yes. market? John Mason: Okay—that is a simple answer. Dr Lydgate: That would be the ideal landing Dr Lydgate, do you want to come in? ground, but there are a lot of questions about how Dr Lydgate: I wanted to raise a question that I the common frameworks are constituted and have about the bill, which is about how these integrated into the United Kingdom Internal Market market access principles would apply in situations Bill. of divergence in labelling. That is explicitly I will give an example that picks up on what identified in the internal market white paper as an Professor Dougan said about the dynamic nature area of concern. I understand that there is an of common frameworks. You cannot have a static agreement on a harmonised approach. Let us say agreement about what regulations will be, that a divergence in labelling occurred. It is because they change. Scotland has the UK confusing to sort out the areas in which the mutual Withdrawal from the European Union (Continuity) recognition provisions apply from the areas in (Scotland) Bill, which proposes continued which non-discrimination applies but, in this case, I alignment with EU rules, although it does not argue that mutual recognition would apply, specify which rules. That is of course significant. because the issue is to do with how the product is produced rather than how it is sold. However, I For example, let us say that the EU decides to flag that question. expand its restrictions on endocrine disruptors— that has been in the pipeline for a while and would entail new product restrictions on a whole host of 09:45 sectors, such as toys, cosmetics and food contact The principle of mutual recognition simply materials—and then the UK decided not to requires that the product be sold and not that it be introduce those restrictions. That would put standardised. For example, there could be a Scotland in an interesting position vis-à-vis situation in which England decided to change the common frameworks. Would it integrate or threshold at which genetically modified organisms diverge? If it diverged, it would be in the need to be labelled. I believe that the current unfortunate situation of imposing stricter figure is 1 per cent, but England could decide to requirements on its manufacturing sector than change it to 5 per cent. The relevant labels would those being imposed in the rest of the UK, and then disappear from some goods. I presume that Scotland would also be required to import those those goods would be imported and would be non-complying products. exempt from the labelling requirement, or there

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Common frameworks are definitely the way the other will do the job. If the harmonisation—or forward, but there are still a lot of questions about common frameworks—process fails, then a strong how they operate. principle of mutual recognition will, in effect, do the job for you. You do not need harmonised Dean Lockhart: Professor Dougan, what are frameworks any more if goods are simply free to your views on that? be produced wherever they are produced and sold Professor Dougan: I am glad that you came to wherever you want them to be sold. me second, as I have had the chance to jot down In a way, we can describe the bill as an four quick points—he said, holding up five fingers. insurance policy but, in a very different way, it is It is four quick points, though. First, I endorse what an insurance policy that almost removes the need Emily Lydgate said. Yes, of course this is an for common frameworks for harmonisation if that insurance policy, but that makes it sound like process does not deliver the desired results. something that might be used only as a last resort or in rare circumstances. It is an insurance policy Dean Lockhart: I thank you both for your in the sense that it is a default position, but that responses. I want to follow up on the issue of the position need not necessarily be rare or unusual; it dynamic nature of common frameworks. Once just means that, as trade develops, regulatory they are agreed, significant areas of regulatory preferences change, science and consumer divergence will be recognised. It will involve not demand throw up new challenges that regulators just existing static areas in which regulations are have to address and new barriers to trade will divergent across the UK but whole areas of arise that fall outside the scope of the existing devolved competence in which future changes in common frameworks. The whole point of internal devolved regulation can be made. Does the panel market principles such as non-discrimination and recognise that the common frameworks will build mutual recognition is that they provide the default in future flexibility for the devolved Administrations solution, which is a better phrase than “insurance to change regulations in those areas and decide policy”. whether to harmonise or diverge within those areas of devolved competence? My second point is that the UK Government has promised that Brexit will lead to a significant Professor Dougan: It is a bit like the distinction increase in the devolved competences of Scotland between things on paper and things in practice and Wales. If that promise is true, it means that that I mentioned at the start. Yes, on paper the the default insurance policy will have a more common frameworks can leave scope for the significant role to play. You cannot have it both exercise of devolved competences and divergent ways: you cannot say that Brexit will lead to a choices, but nothing in the bill prevents those significant increase in the powers of the devolved divergent choices or exercises of devolved institutions but then deny that the United Kingdom competence, even within the scope of common Internal Market Bill will be more than a marginal frameworks, from being subject to the principles of phenomenon. The more devolved powers you mutual recognition and non-discrimination in the have and the more trade barriers you are capable field of goods, for example. of creating, the more you will need this bill to In a way, then, what you are saying is address them. If Brexit leads to a significant completely true, in that, on paper, the common increase in devolved powers, the bill will have a frameworks are not some monolithic commensurately greater role to play in regulating harmonisation that imposes uniform rules across the way in which those devolved powers operate all the territories; they leave room for devolved in practice. competence. However, the bill will subject the The third point is that we are still in the process exercise of those devolved competences to the of negotiating and finalising the common principles of non-discrimination and mutual frameworks. Obviously, if that process falls apart, recognition. Ultimately, therefore, common begins to break down or does not produce the frameworks are not the answer to the problem that results that are required, the bill’s scope of we have highlighted; they are simply the application will be commensurately greater. I am application of those problems in a slightly different not by nature a cynical person, but if I were being regulatory context. cynical, I would suggest that, in a way, the bill is Dean Lockhart: Dr Lydgate, you mentioned the the insurance policy against the need for common potential impact of the UK Withdrawal from the frameworks. In trade law terms, we would European Union (Continuity) (Scotland) Bill and ordinarily pitch two absolutes in competition with Scotland keeping pace with EU law in future. What each other; we would say that, if you want to solve impact could the keeping pace powers have on barriers to cross-border trade, you can harmonise the objective of common frameworks and them, which is common frameworks, or you can harmonisation in the UK internal market? use a strong principle of mutual recognition. However, you do not need both, because one or

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Dr Lydgate: That will depend entirely on what far we decide to harmonise and establish common the UK does with its regulation in future, which is a frameworks and somehow come up with the same question that interests many of us. or similar solutions to comparable problems? The approach opens up wide scope for potential Many systems, including the EU system, are market access barriers between Scotland and the engaged in constantly striking a balance between rest of the UK. Of course, those would be those two things: when should the EU harmonise addressed under the internal market bill—meaning and when should it leave it to cassis de Dijon and that if EU regulations led to product-related the operation of market forces through the control restrictions or bans, Scotland would still need to of the principle of mutual recognition? import the products from the rest of the UK and not discriminate against them on the basis of how they were labelled or presented. There is certainly 10:00 scope for direct conflict there. In a way, what Patrick Harvie says is completely right. A very strong principle of mutual recognition, Dean Lockhart: Convener, I appreciate that I or cassis de Dijon on steroids, weakens the need have taken up a bit of time, so I will stop there. for common frameworks and harmonisation The Convener: Thank you. because the same result can effectively be achieved through the operation of market forces Patrick Harvie (Glasgow) (Green): I will follow rather than centralised regulatory intervention. A up on the notion of the bill providing either a default solution weakens the incentive to engage default position or an insurance policy, as in the more complicated process of negotiation Professor Dougan described it, in the context of and compromise. Maybe I have just made the the negotiation of common frameworks. I suggest point in a more diplomatic way, but I agree with that the situation is even worse than that, because what was said. if this is a default, surely it weakens any incentive for the UK Government to sit down, negotiate and Patrick Harvie: It sounds as though it will leave compromise in order to reach a common us in a similar position to the legislative consent framework by mutual agreement. mechanism, in which the Scottish Government or the Scottish Parliament is asked, “Please consent If there is no incentive to do that, because the to this, or we will do it anyway.” That is the kind of UK Government can always fall back on the power imbalance that we will have. default expectation of centralising power, surely we are less likely to reach agreement by The witnesses have recognised that there is a negotiation and compromise. We will get that only bit of an assumption that any kind of regulatory if all parties and Governments in these islands divergence or difference is an unacceptable trade recognise that reaching agreement is a way of barrier, and that internal markets do have solving or avoiding a problem that they all find differences and divergences. Surely there is a disagreeable. Surely the bill makes it less likely strong case for working to the principle that it is that we will agree a negotiated, mutual resolution only when the rules or standards are incompatible to some of the issues. that we have a problem that cannot be resolved in the normal democratic way. Professor Dougan: When I suggested, in answer to Dean Lockhart, that the cynical bit of me For example, one of the first policy areas that might suppose that the bill is, effectively, a way of was mentioned in the internal market white paper not having to worry too much about common that preceded the bill was building regulations. frameworks or future needs of harmonisation, I They have been fully devolved for more than 20 might have been expressing the same point in a years and were separately administered even more diplomatic way. I agree. The bill cuts across before devolution. If two jurisdictions within the UK the whole debate about not just common have different standards about how efficient frameworks right now but the framework for future insulation products need to be, a manufacturer common frameworks or harmonisation—or can decide whether to meet one standard or both. whatever term we want to use. Manufacturers are free to decide whether they will comply with both standards. We only really have a If we accept that internal markets are dynamic problem if one jurisdiction says that the insulation phenomena that need to be constantly managed, has to be made from a minimum of 60 per cent and that the process of managing the internal organic material and the other jurisdiction says market is just as important as the substantive that it has to be made from a minimum of 60 per outcomes that are reached, the question that we cent synthetic material, because a manufacturer is have to address is this: what is the right balance in incapable of meeting both standards. having principles of mutual recognition and non- discrimination, whereby different territories can go Is there not a case for saying that that is the their own way but we find a method of managing principle that we should be identifying, and that the trade implications of that divergence, and how

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there is a problem only when it is impossible to The problem with the bill is that mutual comply with both sets of standards? recognition is not being used as a way of identifying problems so as to help find a political Dr Lydgate: The EU’s approach has been to solution for their resolution. In effect, the bill is allow divergence where possible but, when saying, “We have identified a problem, and we are harmonisation is necessary for free movement, it going to sweep it aside through the operation of will be required. Within that, there is scope for market forces.” We can think about the bill as divergence as long as countries are willing to put effectively subjecting the exercise of devolved up with the market access barriers that you have competence to market forces, in a market where identified. England makes up 80 or 85 per cent of market That is where market power comes in. If you share. have a much larger economy with much more That answers your question in a roundabout construction going on, it makes more sense for way. The starting assumption of the bill is not that manufacturers to produce products to that the exercise of divergent regulatory preferences is standard than have a separate supply chain. An an issue that we need to redress through political example of that would be in the trade agreement dialogue in order to identify legitimate public between the EU and Canada. Canada got interests and decide when barriers to trade are increased low-tariff access for beef, but it has not justified or unjustified and how best to address used that and it has not exported to meet them. The underlying starting point of the bill is anywhere near its quota, because its supply that the exercise of devolved competence creates chains are all set up to feed into the US market. It problems that we need to sweep away, and the is just simply not economical for those farms to set tool that we will use to sweep them away is market up a separate supply chain just for the EU market. forces, through the sheer size of the English That is where the logic of market size comes in. economy. In practice, it is the English choice Professor Dougan: This is a useful point at which will prevail, not the Scottish or the Welsh which to draw a direct contrast between EU choice. That is a very different starting assumption practice and the proposals in the bill. Everything from that of the EU. depends on our starting assumption. Trade law Patrick Harvie: That is quite powerfully put. The gives us a toolbox. It provides us with a range of last question that I want to explore with you both ways that we can manage markets, but it does not leads on from that. I have a concern that this tell us what the best combination of those tools process is about sweeping away not just devolved should be. We still have to make a value judgment competences but democratic accountability. The when we start about which tools we want to use. judgment about whether a form of divergence or a In the EU context, the basic assumption is that potential market barrier is acceptable should be a we want a well-regulated market that is left to the democratically accountable judgment. Whether we member states, unless the barriers to trade that see decisions being taken into the courts, being are created are of such a nature and scale that centralised to the UK Government or otherwise they require centralised formalisation. The EU being taken away from parliamentary system works by member states, by default, accountability, we have a problem. regulating their marketplaces as they see fit, It seems to me that, even if we had system of subject to the principle of mutual recognition. derogations and justifications added to the bill, it However, mutual recognition provides a broad would still be unacceptable in terms of democratic range of exceptions and derogations, through accountability, because the devolved Government which member states can justifiably maintain trade would have to apply for a derogation before it was barriers for all manner of legitimate public interest able to make a regulatory proposal to Parliament. reasons. There has been only one session since devolution When a member state does that, it effectively began in which a single political party had a flags up to the European Commission that there is majority in the Scottish Parliament. If we accept a trade barrier, that it is a legitimate trade barrier, the principle that ministers do not represent a and that maybe the Commission should think majority until Parliament has voted, surely the about harmonisation. In that way, the emergence existence of derogations for which ministers have of legitimate trade barriers acts as a kickstart to to apply are an inadequate democratic lock on the the process of political dialogue, whereby the kind of legitimate choices that the Scottish member states and the other EU institutions begin Parliament or other Parliaments ought to be able to think about just how serious a problem it is, to make. what the best solution is to adopt in relation to it, Professor Dougan: In response to a couple of and so on. We can almost say that mutual earlier questions, I indicated that, taking the bill as recognition in the EU context is a problem- it stands and seeing how it could be readily identifying principle. It basically says, “Here is a amended, my bare minimum baseline for problem. How are we going to solve it?”

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improving the bill would be to widen the system of negotiation and the complexity of that. What do derogations and justifications. you think the institutional architecture needs to be to make that work? One of the problems with the bill is that it tries to replace the processes of dialogue and negotiation Dr Lydgate: I will bring up the question of to find political solutions to how we address the transparency. I have no idea what is going on in problem of barriers to trade, not only with the the common frameworks discussion. A lot of us starting assumption that that is a problem that are interested in how robust those discussions are needs to be swept aside, but in the way that it and how they are progressing. The role of the proposes using automatic, legally enforceable devolved nations in trade negotiations is an principles, applicable before the courts, to do the analogous problem. We know that there is some job for it. discussion about a concordat on international trade, but I do not think that that has appeared and That is why I suggested that my preference I do not have a sense of what that could look like, would be that the trade issues that are created by in contrast to the Internal Market Bill, which sets the UK internal market are managed through a out procedures and competences. system of pre-legislative dialogue. It is not for me to speculate on whether that is best done by There is some asymmetry and simply putting governments or parliamentary committees but, to some of the devolved nations’ inputs into me, a system of pre-legislative dialogue that tries legislative form would be useful in the context of a to encourage an accountable political debate lack of trust, as would developing dialogues that about whether a problem exists, its nature and have a formal role in the end result. I am not sure scale, and the most appropriate solution to that how exactly that would happen because problem, would be far preferable to an automatic devolution is not my area—I am a trade lawyer— legal rule—it is not even an assumption—that so I am a little bit hampered in spelling it out, but regulatory divergence is a problem that needs to that is the gist of it. be swept aside in practice. Dr Lydgate: I will call attention to the fact that 10:15 that brings up the question of who is deciding and Jackie Baillie: Professor Dougan talked earlier who gets to determine whether a derogation is about pre-legislative dialogue. However, I am legitimate. The courts have quite a lot of power. conscious that the European Union has the The complexity in the drafting of the bill struck European Commission, which has a neutral, me when I was reading it. Many terms, such as independent governance architecture that appears “relevant connection”, “relevant requirement”, to be missing from this bill. It is almost a dispute “direct and indirect discrimination”, need to be resolution mechanism. Do you think that there is a interpreted. I therefore agree that the bill replaces need for that? a political process with a judicial process and that Dr Lydgate: Yes, and the question is not only there should be some other way of resolving those about having a body like that; it is about defining issues on an intergovernmental level. the powers of devolved nations, in essence, to The Competition and Markets Authority has steer the discussion. I am again not sure what been empowered with an advisory oversight role, would be the best way to do that, so I will refer to which strikes me as being beyond the type of Professor Dougan. competences that it has now. Not to malign that Professor Dougan: Like Emily, I am not a body, but it seems to me that it would be devolution specialist. Therefore, I will use the EU appropriate to make sure that the CMA has system—which I know very well—as an example, representation from devolved nations so that it has and I will then draw out the features that a range of competence to be able to oversee distinguish it from the situation in this bill. some of the issues, which can be technical and specific to certain sectors. The starting point is the fairly essential proposition that the principle of mutual recognition Patrick Harvie: I presume that that would depends on trust. Indeed, most trade principles require expertise in environmental governance, do, but that one does in particular: the two go public health and so on, which are not factors in completely hand in hand. It is very difficult to have the appointment of the CMA’s board? a situation in which a territory is simply expected Dr Lydgate: Exactly. to let imported goods and services be freely available to its citizens and consumers without any Jackie Baillie (Dumbarton) (Lab): Patrick further or additional regulation and without those Harvie’s questions lead neatly on to the area that I goods and services having to comply with the will explore. territory’s own local legislation unless there is a Both our witnesses have talked about the need high level of mutual trust between all of the for new governance structures, dialogue and participating territories that they will all respect

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certain common values and standards, and that The Convener: I thank Professor Dougan and the rules will apply fairly between them. Dr Lydgate for their very helpful evidence. A huge amount of the EU’s institutional and I will suspend the meeting to allow our next governance effort goes into creating the panel of witnesses to join us. We will recommence underlying mutual trust that makes the system of at 10.30. mutual recognition and harmonisation work. It is why, for example, there is a very complicated 10:20 legislated process at EU level that tries to balance the interests of the large member states and the Meeting suspended. small ones. It is why the independent Commission, which is meant to oversee the operation of the single market without any influence from any given member state, exists. There is an independent dispute settlement mechanism through the European Court of Justice so that there is a judicial body that is independent of any of the participating territories. Even then, we can see what happens when mutual trust breaks down. We have seen it in fields like criminal law co-operation and, more recently, in the field of medical supplies when the pandemic hit the EU. When mutual trust breaks down, mutual recognition breaks down as well. Therefore, the key challenge that the UK has to think about is how it maintains a system of mutual trust that will justify and make operational the core principle of mutual recognition, which underlines this bill. The problem is that the bill does nothing about that. It simply assumes that the principle of mutual recognition can be transposed on to the UK’s existing empirical and constitutional structures and that it will operate automatically as a set of rules to deal with trade problems. I am not sure that that is a sustainable political or constitutional proposition. I mentioned having a pre-legislative dialogue whereby the four territories would sit down and think about potential trade barriers and how best to resolve them through an agreed political solution. However, even that pre-supposes a level of mutual trust and cooperation between the political actors that are involved to make that system work. I suppose that one of the concerns that has been raised about the UK internal market as a phenomenon is that, at present, there does not appear to be that mutual trust between the Administrations that currently govern different parts of the UK. To a private citizen such as me, it certainly appears that way. My answer is that mutual recognition requires mutual trust, and one of the big lacunae in the bill is that it does nothing to create the institutional framework that would generate the mutual trust that could possibly justify a market system as strong as the one that the bill proposes. Jackie Baillie: Thank you, Professor Dougan. That is very helpful indeed.

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10:30 agreements have been signed with 48 countries, On resuming— covering trade worth more than £110 billion, in 2018 figures. That represents 74 per cent of the Trade Bill trade with countries with which we were seeking continuity before the withdrawal agreement was The Convener: We now turn to evidence on the signed. UK Trade Bill 2019-21 and its associated The UK Parliament has had the opportunity to legislative consent motion. First, we will hear from scrutinise fully all the continuity trade agreements the Rt Hon Greg Hands MP, who is the Minister of that we have signed, in line with the framework State for Trade Policy with the UK Government. I that was set out in the Constitutional Reform and warmly welcome Mr Hands and I invite him to Governance Act 2010, also known as CRAG. make a short opening statement, if he so wishes. Parliamentary reports have been laid alongside The Rt Hon Greg Hands MP (Minister of State each continuity trade agreement to explain our for Trade Policy): Thank you, convener, and approach to delivering continuity with each partner thank you for inviting me to attend the committee. I after the transition period ends. Those reports hope that you can hear me okay. I look forward to make it clear that all the agreements that have the discussion and to assisting the committee been signed to date provide for the maximum level today with its scrutiny of the Trade Bill. As you of continuity. Any changes that have been know, I first appeared in person at your committee required in order to achieve that in practice have in March 2016 to talk about the fiscal framework. I been set out and explained. take my interactions with the Scottish Parliament I hope that that provides the committee with very seriously, so it is good to be back with you greater clarity about what the concurrent powers again today. will and will not be used for, but I also recognise In relation to the trade bill, I emphasise that, as that the devolved Administrations and legislatures with the Trade Bill 2017-19, which the committee want additional reassurance that the powers will considered in 2018, this Trade Bill covers only be used appropriately. That is why we have trade agreements that the EU had in place as at committed to not normally using the concurrent 31 January 2020. As such, and as the Scottish powers in areas of devolved competence without Government has noted in its legislative consent the consent of the relevant devolved memorandum, the bill is essential for providing Administration or Administrations, and never certainty, continuity and stability in our existing without consulting them first. That is one of the trading relationships, and for businesses and many commitments and amendments to the bill consumers in all parts of the UK. that we have made at the request of the devolved Administrations. Those are set out in full in the Throughout the passage of both Trade Bills, we Scottish Government’s memorandum. have taken significant steps to address the issues and concerns that were raised by the Scottish In particular, I would like to highlight the Government and by the committee. I am pleased amendment that we have made in relation to the that that has led to the Scottish Government restrictions on devolved ministers’ use of the recommending consent for all the relevant powers in the bill. The Scottish Government and clauses, and I hope that our discussion will also the committee raised concerns about the lead the committee to support that. restriction in the Trade Bill 2017-19 relating to section 12 of the European Union (Withdrawal) Act The main clauses for which we are seeking 2018. We have listened to those concerns and consent are those that relate to the concurrent have removed that restriction for the Trade Bill powers in the bill, which will be used to implement 2020. We have taken great steps to ensure that the trade agreement that we are transitioning. the bill reflects the views of the devolved Because parts of those agreements touch on Administrations and legislatures, and I am devolved matters, we have put in place concurrent confident that the bill respects the devolution powers to provide greater flexibility in how settlement. continuity agreements will be implemented. That will allow each devolved Administration to I know that, although it is outside the scope of implement the agreements, independently in some the bill, the wider role of the devolved cases, while also allowing the UK Government to Administrations in international trade is of great legislate on a UK-wide basis when it makes interest to the committee. We have now practical sense for it to do so. established with devolved ministers a ministerial forum for trade that meets regularly to discuss all When the committee scrutinised the previous aspects of our trade policy. It had its inaugural bill, some members expressed uncertainty about meeting in January and has met twice since then. I how or whether the agreements would be chaired its most recent meeting in July, when we transitioned. However, since then, 20 continuity

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discussed the progress of all of our negotiations in The Convener: Thank you for that detailed and detail. helpful opening statement. If you do not mind, I will begin the questions. I also have regular bilateral discussions with Scottish Government minister Ivan McKee—I think During House of Commons scrutiny of the bill, that you will hear from him after me—the most you explained that because trade agreements recent of which was on the conclusion of the under the bill had previously been scrutinised as Japan agreement the week before last. EU agreements, it would not be proportionate use of parliamentary time to give those agreements We have also established structured further scrutiny. However, as the Government engagement at official level; every six weeks the notes in its LCM, the powers could also be used in senior officials group meets, and there are regular implementation of entirely new trade updates to devolved Administrations’ officials from arrangements in circumstances in which the our chief negotiators. That engagement is trading partners in those agreements have existing supplemented by day-to-day engagement on the agreements with the EU. Why does the bill not technical detail of our policy. provide for devolved parliamentary scrutiny of The impact of that engagement can be seen in each rolled-over agreement, in order to enable how the Scottish Government’s perspective has proper scrutiny of new parts, on devolved areas of been reflected in key parts of the UK-Japan responsibility, of rolled-over agreements? comprehensive economic partnership agreement, Greg Hands: You are right: that has been an which was agreed in principle earlier this month. area of question that has featured throughout the The Scottish Government made it clear that it Trade Bill process. As I may have mentioned, I wanted priority to be given to greater ambition in have, rather unusually for a minister, taken a trade financial services. That is reflected in the improved bill through the House of Commons twice—the market access that we have secured for UK Trade Bill 2017-19 and the current one. financial services, including greater transparency and streamlined application processes for UK The only such countries that would be in the firms seeking licences to operate in Japan. scope of the powers are ones with which the EU had a trade agreement signed before 31 January. The deal also creates an annual dialogue That excludes, for example, the United States, between Her Majesty’s Treasury, UK financial Australia and the Mercosur countries. We should regulators and Japan’s Financial Services Agency be clear that the powers would be purely for that will explore ways to further reduce regulatory agreements with countries such as I have friction—which would be impossible were the UK described. still to be in the European Union. Financial services are one of Scotland’s largest exports, so The purpose of the continuity programme is, in that example clearly demonstrates the benefits general, to stick as closely as possible to the that Scotland stands to gain as part of the original agreement. That takes us all the way back agreement and our wider independent trade to 2016. The UK Government made a judgment policy. call that trying to reopen all 40 agreements would be practically rather difficult, and might mean that I will give another example. Scottish we would be unable to roll over enough of the stakeholders have emphasised the importance of agreements in time. That time was originally geographical indications. Again, the agreement envisaged to be by March 2019, of course. secures additional benefits beyond the EU-Japan Basically, we decided to stay as close as possible deal that mean that iconic Scottish products such to the original agreement. as Scotch beef and lamb could for the first time be protected in the Japanese market. So far, 20 of the 40 agreements that have been rolled over stick very close to the original In essence, the bill is about continuity and agreement. As you have rightly pointed out, they certainty: continuity of the existing trade have been through the existing House of agreements that we have through our membership Commons and House of Lords scrutiny system, of the EU, and the certainty that continuity offers and have been scrutinised as EU agreements. for businesses in Scotland and throughout the UK, However, as you have also rightly pointed out, which is especially important in this time of global there is scope for a new agreement or a economic uncertainty. We are determined to substantially changed agreement that is based on continue to engage effectively with the devolved the original agreement. That is close to what we Administrations across all areas of trade policy in have just done with Japan, which I talked about in order to achieve that, so I look forward to my opening statement. continuing our dialogue to ensure that that co- operation is successful. We have laid on additional scrutiny at UK level and are having additional interaction with the Thank you, again. I look forward to questions Scottish Government and the other devolved from the committee.

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Administrations. At all stages, I have talked trade has consequences at the devolved level. I through what we have been doing with Japan with am happy to take that away and to reflect on what the Scottish Government’s Minister for Trade, you have said. I could perhaps also speak with the Investment and Innovation, Ivan McKee. As I Scottish Government to see what we can do. mentioned, I had a call with him just last Monday, I The Convener: Thank you for that commitment. think, in which I took him through a lot of the detail It is helpful. of the agreement. The committee has stated in a number of In the UK Parliament, we have had additional reports—including in the Trade Bill LCM report— scrutiny of the Japan agreement. The Secretary of that provisions that would allow UK ministers to State for International Trade has made an oral make statutory instruments in devolved areas, statement and, before we made the agreement, without any statutory requirement to seek the we tabled a scoping assessment on the consent of Scottish ministers or the Scottish negotiation objectives for the agreement. All those Parliament, cut across the devolution settlement. things were on top of what one would normally have expected for a simple roll-over agreement. You have confirmed in the House of Commons your commitment that UK Government ministers The House of Commons has the ability to will not normally use the powers that will be scrutinise the agreement further, of course. We conferred by the bill in devolved areas without the will publish the impact assessment next month. consent of Scottish and other devolved There will then be the opportunity for both UK Governments’ ministers, and that you will never do Houses of Parliament to scrutinise the agreement. so without consulting them. That is helpful. Why is The House of Commons will have the opportunity that commitment not in the bill? to do so through the CRAG process, and the House of Lords will have the opportunity to do so, Greg Hands: You are right; we have come to a as well, if it wishes to do so. good arrangement. We will not normally use the powers within areas of devolved competence The convener was right to ask the question. As without the agreement of the devolved you rightly pointed out, it has been asked a few Administrations, and never without consulting times during the passage of the bill. However, the them. That is the right course. arrangements that are in place are proportionate and allow sufficient parliamentary scrutiny—in That arrangement is not in the bill because of particular, of new agreements with countries with the legal status of international trade, which is a which the EU had an existing agreement on 31 reserved matter. It is important for us to keep that January 2020. and to make sure that the two Governments work well together on that. I do not think that it is The Convener: You can probably see the necessary or desirable to put the confirmation that Scottish Parliament’s dilemma. If there is a new you asked for in the bill because that would create part of a rolled-over trade agreement that engages the potential to erode the legal status of devolved areas, although there might be international trade as a reserved matter. consultation of a Scottish Government minister, there is no formal role in legislation that enables The arrangements that we have in place will the Scottish Parliament to give a view on whether work well, and have done so already. We have that new part is appropriate or otherwise. I ask you had discussions with the Scottish Government on and the UK Government to have another look at the 20 agreements that we have so far rolled over. that to ensure that the proper scrutiny role of the The Convener: I hear your answer, but I am a devolved institutions is recognised. bit sceptical about whether what I suggest would Greg Hands: I am very happy to have a further undermine the position of the UK Government in discussion with Ivan McKee in particular about the way that you have outlined. It is already how your scrutiny might be able to kick in. I am enshrined in various pieces of legislation through keen to work with you and to make sure that the the Sewel convention; this would be no different, Scottish Parliament is involved in our trade policy. whatever we think of the Sewel convention. It is important. Murdo Fraser: I have a follow-up to the convener’s line of questioning. You rightly said 10:45 that it is important that we respect the devolution I mentioned the Japan deal and the US deal. settlement, and that trade policy is reserved to The scoping assessment shows that Scotland will Westminster. You also said that there is an benefit more from that than any other nation or undertaking that UK ministers will consult the region of the UK. I am keen for you to have an devolved Administrations. Do you agree that to appropriate role. We respect the devolution give the devolved Administrations an effective settlement—while remembering that international right of veto over future trade agreements would trade is a reserved matter—and we know that not be in line with the devolution settlement?

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Greg Hands: That is right. There should not be actions could be called into question without a a veto. That is important because Scottish legally set up trade remedies authority. producers and consumers also need access to The fourth area concerns data-sharing powers. those important UK trade agreements. We must The ability to share trade data at Her Majesty’s make sure that the trade agreement will apply Revenue and Customs and beyond could also be throughout the four nations and all the regions of called into question if the bill did not become an the UK. That is also important for those who want act. It is very much about continuity. The to export from Scotland—I mentioned Japan implications for a lot of the UK’s current trade earlier—and for consumers in Scotland. practices could be very severe if the Trade Bill did It is important that the reserved nature of trade not become law. policy be respected. There should be no veto for Murdo Fraser: Thank you for that any of the three devolved Administrations. comprehensive answer. I have one final question. Murdo Fraser: Thank you for that. Let us move The bill deals only with trade agreements that on to the background to the bill and why it is have already been entered into. If any new trade required. What would be the impact for Scottish agreements are negotiated, is it correct that those businesses and exporters if the Trade Bill were not will require a separate mechanism and legislative put in place? For example, would there be a risk of vehicle? damaging competition from competitor countries Greg Hands: That is absolutely correct. It such as China? applies only to countries with which the EU had a Greg Hands: If the Trade Bill did not get on to trade agreement prior to the withdrawal date of 31 the statute book, there would be major January 2020. The convener pointed out, rightly, implications. It is currently going through the that it could theoretically apply to a new trade House of Lords. It completed its passage through agreement with one of those partners, which is the House of Commons in July and has had its what we have with Japan, but it does not apply to second reading in the Lords, so it is going well so countries with which the EU does not have a trade far. agreement, such as the United States, Australia, Mercosur or India. There are four principal areas of the bill, and there would be implications for all four if the bill Murdo Fraser: Thank you. That is very helpful. were not passed. For example, it could endanger Tom Arthur (Renfrewshire South) (SNP): the UK’s accession to the Government Good morning, minister. I have a brief procurement agreement, which is what is called a supplementary question on a point raised by plurilateral World Trade Organization agreement Murdo Fraser, with which I understand that you of 20 countries allowing access to each other’s agreed. The devolved Parliaments do not have a procurement market—which would allow UK power of veto, and the view of the UK Government businesses to have access to procurement bids in is that they should not have such a power. The other countries such as the United States, corollary of that is that the UK would and should Australia and Japan. There would also be an have a power to impose agreements. If a scenario impact on organisations doing tenders in arose in which the Scottish Government, Scottish Scotland—for example, Government bodies would Parliament and a majority of Scottish MPs were not necessarily be able to get the best price or opposed to a trade proposal by the UK service if the UK was no longer in the Government Government, under either the bill that we are procurement group. discussing or any future agreements, would the Secondly, there would be an impact in terms of UK Government be minded to press the pause the 40 EU trade agreements, some of which are button and seek to engage in discussions to find extremely important. We have already talked consensus, or is its view that it is a reserved about the agreement with Japan. There is also a matter and for the UK Government and Parliament considerable amount of trade with Canada, to decide? Switzerland and South Africa—the figure is about Greg Hands: Thank you, Mr Arthur. That is a £110 billion—which could be at risk if the Trade good question. The answer is that we should Bill did not become law. always engage in discussion. First, as I mentioned On trade remedies and defences, not having the earlier, it has always been a priority of mine, since trade remedies authority set up in statute could I began at the department, at its inception, to have significant implications for our trade ensure that our international trade policy has defences. When we are taking action against support in all four nations of the United Kingdom. something like the dumping of steel goods or The policy is designed to benefit all four nations. ceramics into the UK market by producers in As I mentioned earlier, the scoping analysis for the countries such as China, the legal basis for those US agreement shows that Scotland will benefit more than any other nation or region of the UK by

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having a free trade agreement with the United bogged down in the esoteric side of it, but the States. My starting point has always been that it is most important thing is to deliver things that will our firm policy to ensure that all four nations of the benefit businesses and consumers. That applies UK benefit. to all four nations and all regions of the UK. Secondly, we interact frequently and directly Angela Constance: We all understand that the with Scottish businesses and consumers. Last essence of the bill is about rolling over current week, I was talking to the Scottish Chambers of agreements, but, on several occasions today, the Commerce; later today I am doing a British- minister has made quite loose statements about American webinar with businesses in Scotland on how Scotland should be involved in trade policy. I the UK-US free trade agreement. As you probably want to highlight to the minister that, in 2019, the know, NFU Scotland is on our Trade and Constitution Committee at Westminster Agriculture Commission. I have recently met the recommended a role for the devolved nations in NFUS, the Scottish Smoked Salmon Producers the negotiation and scrutiny of trade agreements Association and lots of other Scottish bodies and said that the devolved nations should “be directly. effectively involved”. The third area is direct interaction with the I put it to Mr Hands that the involvement of the Scottish Government. Since I returned to the post devolved nations surely amounts to something of minister with responsibility for the devolved more than Greg and Ivan having a wee chat on aspects of trade, in May, I have had five meetings the phone; or more, indeed, than the minister with Ivan McKee, whom you will hear from later. I doing his job by engaging with Scottish business— am not telling you anything that you do not already which we would all accept as vitally important but know when I say that Ivan McKee and I do not which, I suggest, is the bare minimum of his job agree on everything, but that interaction is very description. Does Mr Hands agree with the House strong and frequent. of Lords Constitution Committee? How will he—or will he not—implement the recommendations of I do not think that we would get to a position that committee? where we would have a trade agreement that would meet strong opposition from any of the four nations of the UK or any of the English regions. 11:00 That would not be the case. However, it is Greg Hands: I will go into a little more detail important for the devolved Administrations not to about our interaction. It is not just at ministerial have a veto. We will not be in a position where we level; it is important for us to involve Scottish have done a trade agreement that is wildly Government officials as well. unpopular in one of the four nations of the UK. We have a senior officials group of UK Tom Arthur: Are you absolutely committed to Government and Scottish Government officials, avoiding a scenario in which the Scottish which meets every six weeks to discuss trade Government, the Scottish Parliament and the policy. That has been going well. We also have majority of Scottish MPs are opposed to a trade the ministerial forum for trade, which has had deal that the UK Government chooses to go three meetings so far this year and which is also ahead with anyway? Is that something that you going well. That involves me, Ivan McKee, want to avoid, and will you strain every sinew to Baroness Morgan and Diane Dodds in Northern ensure that that does not happen? Ireland. Greg Hands: As I said, our objective is to have Those kinds of things enable us to have regular a trade policy that works for the whole of the UK. and frequent interactions. As I have said, I talk to That is what we have had so far in the 20 rolled- the Scottish Government minister on the specific over agreements. No one has pointed out anything agreements that are coming up. For example, we in those rolled-over agreements that would be had a very good discussion on Japan. As you can unpopular or detrimental to Scottish interests. It is ask him, I am constantly asking what his main our intention to negotiate on behalf of the UK, asks are, from the Scottish Government’s exactly as the Scottish people would expect us to perspective, in the different agreements that are do, and to get agreements that work for the whole coming up. I make sure that the asks of the of the UK. Scottish Government and the other devolved I am acutely aware of the importance of Scottish Administrations—and also, directly, as you would goods and services in our trade policy. As I expect of me, the asks of Scottish businesses— mentioned, I meet Scottish producers and are listened to. businesses very regularly in relation to both goods I think that that structure is working well. The and services, and we need to ensure that they committee’s involvement and scrutiny are also benefit from those trade agreements. In my slightly very welcome. wonkish world of trade policy, people can get

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Angela Constance: What about the Angela Constance: Forgive me for interrupting, Constitution Committee’s recommendation that the but the nub of my question really is about who is devolved nations should be involved in the going to trust you if your Government is not going negotiation and scrutiny of future trade to stick to its word. When you have to traipse agreements? Do you have a view on that? round the world to negotiate trade agreements on all our behalf, whether I like it or not, who is going Greg Hands: I do not agree that the devolved to trust that you will stick to your word? Administrations should be at the table when the negotiations are happening; however, I agree that Greg Hands: I absolutely stick to my guns that there should be regular interaction and regular the United Kingdom Internal Market Bill is an briefing of ministers and Scottish Government essential piece of legislation and an important officials about what is going on at a negotiation piece of legislation for businesses in Scotland. and what we think is happening with an Since the row about that bill, we have made an agreement. agreement in principle with Japan on the UK- Japan trade deal. Therefore, the Japanese clearly We will share the text of the Japan agreement, trust our word when it comes to international trade which is currently going through legal scrubbing. agreements. That deals with the basis of your Throughout the process, we allow significant question and is the proof of the pudding. access by the Scottish Government and the other devolved Administrations. That is the appropriate Angela Constance: We have heard interesting level; it respects the fact that international trade is evidence on the Japanese agreement, but I will a reserved matter. leave it there. Angela Constance: Okay. You disagree with Dean Lockhart: I want to follow up on the your own Westminster committee about economic partnership agreement that was signed involvement in negotiations and scrutiny; your idea with Japan. Last week, I chaired a meeting of the is just to stick to a little bit of chat. cross-party group in the Scottish Parliament on Japan at which the consul general of Japan I will move on, convener, to my final question for highlighted that, under the EPA, there will be Mr Hands. Although I recognise the scope of the increases in the number of Scottish products that bill—what it is and is not about—it is crucial that benefit from protected geographical indication. we all look to the future. When it comes to That means that Scottish produce such as salmon, establishing future economic and trading cheese, wool and beef will have much better and agreements, how does Mr Hands propose to freer access to the market in Japan. Will the overcome the reputational damage that the UK minister expand on the opportunities that are has inflicted on itself as a result of its United available to businesses in Scotland under the Kingdom Internal Market Bill? By the admission of EPA? Is it a good example of how future free trade UK Government ministers, that bill breaches agreements will be concluded after the transition international law. period? As we have heard from Tory grandee after Tory Greg Hands: Yes, that is a good example. It grandee, who on earth is going to believe, when it takes the EU’s existing agreement, for which comes to establishing future arrangements, that obviously the UK was part of the EU’s negotiation the UK Government will, indeed, uphold what it team at the time, locks in all the gains and goes signs up to? Michael Howard has expressed his significantly further. I think that 98 per cent of UK concern at the UK Parliament using its sovereignty goods that currently go to Japan will remain tariff to break international law. What is Mr Hands going free when our new agreement comes into effect, to do to repair the damaged reputation of the UK on 1 January. Government, for future trade agreements? There are three areas in particular in which we Greg Hands: The United Kingdom Internal have been able to go further than the EU. One is Market Bill is an entirely separate piece of on data and digital. We have removed legislation that is not being led on by the requirements for data localisation. Those are Department for International Trade. important in Brussels but, in a UK context, we I would say two things. First, the UKIM bill is want tech innovation, and removing those central for the good operation of the UK’s internal requirements enables our tech providers to market, which is incredibly important for Scottish innovate more and do more cross-border digital businesses. The amount of goods that leave trade with Japan, in particular. Scotland and go to the rest of the UK is vastly The second area is financial services, which larger than the volume that I am talking about in again are important for the Scottish economy. We relation to international trade. Therefore, in terms have gone further than the EU’s existing of the impact on Scottish businesses and their agreements on financial services to ensure that it ability to sell their produce and services into the is easier for UK businesses to get a licence to UK market, the UKIM bill is incredibly important.

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operate in Japan, which will be of great benefit to a trade agreement would prevent us from keeping Scottish financial services providers. We also have or setting our own high domestic standards. I am better rules of origin within the deal. absolutely confident on that front. The UK Government is absolutely committed to keeping The final area, which you have mentioned, is those standards. geographical indications. The EU-Japan deal had only seven UK geographical indications; we now Patrick Harvie: You are clearly satisfied with have the potential for 70 geographical indications, your engagement with the Scottish Government. which includes a lot of Scottish produce, such as You believe that your approach meets the beef, lamb, Arbroath smokies and, I think, expectation and is agreeable. However, passing Stornoway black pudding, which Angus MacNeil, such legislation does not require us to agree that the chair of the International Trade Committee there is good intention; it is about setting the rules here in London, was particularly pleased to hear by which not only you but the UK Government and about. There is potential for that to have a your successors will operate. This could have geographical indication when it is sold in Japan. been an opportunity to set the new approach—a The agreement will increase recognition among modern, democratic approach—to how such consumers in Japan of high-quality UK produce, matters are handled not only in relation to the and produce from Scotland will be a big part of trade agreements with the limited range of that. countries that are under current consideration but in the future. That is a good example of how we can go further than the EU. The UK’s ability to do its own You could have introduced a bill that, for independent trade agreements—we are, after all, example, required UK ministers to negotiate within the world’s fifth largest economy—is one of the the UK prior to the establishment of their trade biggest opportunities that the United Kingdom and objectives, which would allow civil society to all its nations face. contribute to or comment on draft negotiating objectives. You could have required that a Dean Lockhart: That sounds as though there negotiating mandate for a trade agreement be are genuine and significant opportunities to signed off by a joint ministerial committee, explore under the EPA with Japan, and I know that following genuine input, dialogue and agreement the consul-general of Japan was very excited by negotiation at an intergovernmental level within about those opportunities. the UK. You could have introduced a bill that I want to turn to future free trade agreements required parliamentary scrutiny of successive draft that will be entered into after the transition period. negotiating texts. The European Parliament has Some concerns have been raised about the the opportunity to scrutinise similar texts when the potential for the UK Government to lower EU is negotiating agreements. standards as part of the negotiations to secure You could have introduced a bill that required future agreements. However, UK regulatory multiple levels of parliamentary sign-off which, standards already go beyond EU standards in even if the devolved input were limited in scope to many areas, including health and safety, maternity devolved matters, would have established a and paternity leave and flexible working, to name modern, democratic approach to the making of but a few. Will the minister expand on the UK trade policy and agreements. The bill does not do Government’s strategic priorities when negotiating any of that. Why not? and entering future free trade agreements? Will maintaining world-leading regulatory standards be central to the UK Government’s approach to those 11:15 future agreements? Greg Hands: Thank you for that question, Mr Greg Hands: The answer is clearly yes. We Harvie—let me deal with each part of it. were absolutely clear in our manifesto for the On the interaction that we have had with the election last December about the importance of Scottish Government on the bill, as I said in my maintaining and not compromising the UK’s opening statement and again emphasise, we have excellent standards. We were explicit that there listened to the Scottish Government and the other would be no compromise with any of our trade devolved Administrations in key areas. The partners on standards in areas such as animal amendment that we made to the restriction in the welfare, the environment and food safety. That is bill on the devolved ministers’ use of powers was very important to us and to consumers right across an important change—we listened in that regard the UK. Those standards will remain very high. and made the change. We also listened to the Nothing in any trade agreement would force the concern about the restriction in the bill relating to UK to change its domestic or import standards. It section 12 of the European Union (Withdrawal) Act is entirely for the UK Government and devolved 2018 and removed that restriction. If there is any Administrations to set those standards. Nothing in suggestion that we have not interacted well with

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the devolved Administrations in regard to the Patrick Harvie: I will have one more attempt to Trade Bill, I point out that the changes that we explore this matter, although I suspect that we will have made to the bill have come as a direct result not agree. of representations from the Scottish Government I suggest that, although continuity is your and other devolved Administrations. objective, we will not get continuity in the We could have introduced lots of things into the democratic accountability of power when bill—that is not an unreasonable point of view— compared with the way in which the EU makes but our most important objective has been to trade agreements. Most famously, the transatlantic secure continuity. In reply to Murdo Fraser, I trade and investment partnership raised serious talked about the importance of the continuity concerns, and people across many European aspects of the bill, such as the EU trade countries, including Scotland and the rest of the agreements, the World Trade Organization’s UK, campaigned against it, because they regarded agreement on Government procurement and the it as harmful. Civil society, non-governmental ability to defend UK and Scottish producers from organisations, trade unions and others unfair trade practices in relation to dumping and so campaigned, held power to account and prevented on, which is a very important aspect of our trade the Governments of the EU from doing something continuity and is currently an EU competence. As I that they regarded as harmful. Under the Trade said, our principal objective for the bill since the Bill, we will not have continuity of democratic beginning—it remains the case—has been to accountability of power when it comes to the secure trade continuity. making of trade policy or trade agreements. The third area of Patrick Harvie’s question was Greg Hands: I am not sure that I caught the parliamentary scrutiny. We are confident that our end of that question, but there is complete offer on parliamentary scrutiny stands up well continuity here with the system that the UK has for against comparator countries with a similar the approval of international treaties. There is the constitutional set-up to ours, such as Canada, Constitutional Reform and Governance Act 2010. Australia and New Zealand. Our offer on On top of that, we have added in a lot of additional parliamentary scrutiny is as least as good as those layers of scrutiny, for example, through the in any of the three democracies that are most involvement of the International Trade Committee analogous to the UK system of parliamentary and the publication of the relevant documents, democracy. which goes way beyond continuity. If it was purely a case of continuity, I could just refer you to the It would be worth looking at the whole process Constitutional Reform and Governance Act 2010, that we follow in the UK Parliament for each of the which has been in operation for the past 10 years, proposed negotiations. We publish a scoping but we have gone significantly further through our assessment, which is an assessment of what we interaction with Parliaments, through publication, think the impact of the trade deal might be, through our transparency and through the including on the economy overall. It is an involvement of the International Trade Committee. interesting exercise, because it is an assessment I am confident that, in this case, when it comes to of a trade deal that we have not even started our offer on parliamentary scrutiny, we are going negotiating at that point. It shows the scope for much further than continuity. doing a trade deal with, for example, Australia and looks at the opportunities and challenges of that. Patrick Harvie: Can you point to any example where the proposed legislation requires So far, we have had an oral statement from the agreement in the joint ministerial committee, for secretary of state—[Inaudible.] We publish at the example, in relation to trade matters that will end of each negotiation round a written ministerial impact on devolved competence? statement on how the negotiation round was proceeding. There are frequent interactions with Greg Hands: As it happens, the new Japan the International Trade Committee throughout the deal does not need a change in primary legislation process. For the agreement with Japan and other to make it effective, but if it did, that primary countries, we will publish comprehensive impact legislation would have to go through the relevant assessments that will be scrutinised by legislatures in the UK. That is an example of a Parliament, which then has the opportunity, under case in which Parliaments would have a clear say the Constitutional Reform and Governance Act on any resulting legislation. As it happens, we do 2010, to have a vote on the deal or, at least, to not believe that primary legislation is required for give it further scrutiny. the Japan deal. As I said, we are confident that our overall offer In answer to your question, we are confident on parliamentary scrutiny is strong and at least as that, where Parliament previously had a role in good as those of comparator systems. implementing or changing legislation, that remains as much the case today as it did then.

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Alexander Burnett (Aberdeenshire West) making good progress. Earlier, I mentioned that (Con): Good morning, minister. Despite the fact Scotland, according to our scoping analysis, is set that there are those who would wish it otherwise, it to be the nation or region of the UK that benefits has been very reassuring to hear that countries the most from it, so the whole of Scotland should such as Japan still trust us and are keen to make look forward to that deal. deals. What other lessons have you learned from John Mason: I will ask about the Japan the Japan agreement? Is it a template for the agreement. I am not an expert on these things, but remaining 20 or so agreements? you said that legal scrubbing is going on and that it Greg Hands: That is a good question. Quite a is being done in principle. How long does that few of the agreements were opposed by a number take? What is the timescale for finalising that of Scottish members of Parliament when they agreement? went through Parliament. To the best of my Greg Hands: I expect the agreement to be knowledge, the Scottish National Party signed next month in October, but it is rare that Westminster MPs did not vote for any of them. anything of big substance changes between the [Inaudible.]—abstained on the Japan and the agreement in principle and the signing. It needs Singapore agreements. Others might complain further work on both sides, but I am confident that about continuity of trade agreements, but it is the deal will be signed and in place for 1 January worth remembering that, in the case of the SNP, at 2021, which is the date that we need it on. least, they often opposed those agreements in the first place. John Mason: On the question of implementing trade agreements, from what I understand, there In response to your broader question, the Japan are powers to implement the regulations for five agreement shows that the UK has the ability to roll years, which could be extended for a further five over current EU trade agreements and make them years. That is a total of 10 years, which seems like still operable in a way that involves everybody and a long time. Why does it need to be as long as does not dilute or diminish our standards. that? Secondly, it shows our ability to improve on those agreements. I mentioned the three or four key Greg Hands: Thank you, Mr Mason. I areas of improvement in the Japan agreement. remember fondly our interactions when you were Thirdly, it shows that the UK is back on the world at the UK Parliament 10 years ago. stage with its own independent trade policy, which First, there is often a misunderstanding about has not been the case since the early 1970s, and the sunset clause; the UK Labour Party in the that is has the ability to sign international trade House of Commons thought that it was about the agreements and to retrieve our independent seat agreements. It is not about rolling over the at the WTO. agreements and, every five years, having another Those are all incredibly important things for our look at, for example, the CARIFORUM-UK trade policy going forward and the position of the agreement and whether to roll it over. It is just UK—and all the nations of the UK—in favour of about the powers to make amendments to primary free trade and free markets around the world. legislation to keep those agreements operable. Once again, the UK is now a leading voice at the The power is limited in scope and, on balance, we WTO and other forums in making the case for free think that the right way to do that is to have the trade and the international system. On a number clause in place for five years and then, with the of fronts, the Japan deal was important for agreement of both UK houses of Parliament—as showing the direction of travel for UK independent well as honouring our commitment to consult the trade policy. devolved Administrations—roll over those powers for a further five years. That sunset provision Alexander Burnett: Thank you. would be under the affirmative procedure in both John Mason: I will follow up on that point. houses of the UK Parliament, as well as requiring Would Mr Hands accept that, when negotiating consultation with the devolved Administrations. I with the United States, the EU would have more think that that is proportionate. Not having those clout than the UK? powers and, therefore, not having the ability to keep those agreements operable could be Greg Hands: Not necessarily, but I could throw damaging to our businesses and consumers. It is that question back to you: would Scotland have a proportionate power to be able to roll the clause more clout than the UK? With the Japan deal, the over every five years. UK has shown our ability to get a better agreement and to go further, which is a tribute to John Mason: Thank you; I appreciate you our skilful negotiating team. remembering me from being there 10 years ago. We have just finished the fourth round of our US Greg Hands: I do. talks and we have exchanged market access offers. That work is in a good place and we are

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John Mason: I got promoted after that. and whether there would be an annual report? I [Laughter.] ask that because we have had mixed experiences with some UK bodies. For example, we have a My final point is that the bill sets up the trade very good relationship with the OBR. However, our remedies authority, which is a new body that—I relationship with HMRC was tricky to start with think—is within the CMA. How would you envisage because it felt that it did not answer to the Scottish the trade remedies authority relating to the Parliament, although over time that relationship Scottish Parliament and the other devolved has also improved. Can you reassure us that there Parliaments? would be a good relationship between the TRA Greg Hands: It is not actually set up within the and the Scottish Parliament? CMA; it is an entirely different statutory body that Greg Hands: The trade remedies authority is is in place solely to look at measures taken on set up in shadow form at the moment and is based subsidies, dumping and other unfair trade in Reading. I will check in with my ministerial practices. The idea is that it carries out an colleague Ranil Jayawardena, who is in charge of investigation. The WTO regulates quite a lot of the TRA, but I believe that a relationship has those—[Inaudible.]—and we would obviously already been set up between the TRA and the follow the WTO rules. Scottish Government. We have sought devolved Administrations’ 11:30 views on the appointment and recruitment of non- Your question was on the involvement of the executive members of the trade remedies devolved Administrations. They would be involved authority. However, we do not have specific on various fronts. When an investigation is representatives from the devolved Administrations initiated, we would speak to devolved on the board. Let me try to explain why. It is not a Administrations when we think that it is relevant. representative body; instead, the board is there to For example, if it affected producers from that advise on international trade issues. I totally agree sector or in any of the devolved Administrations, that some of those issues can have more impact we would certainly look to speak to the relevant on one nation or region of the UK than they have devolved Administration. on another. However, the idea of the board is that When the process starts, a call for evidence will none of the members is appointed to represent also be sent to the three devolved Administrations. any of the devolved Administrations. It is not a If any want to register an interest in that particular representative body. We have said the same investigation—for example if producers or about broader producer interests and the trade consumers in Scotland might be particularly unions. This is not a body for interests, it is a body impacted by it—the Administration can register an of experts in international trade, trade remedies interest and the trade remedies authority will need and the actions that might be taken. We have to take evidence from the devolved Administration been very clear about that. However, nonetheless, and formulate that as part of its proposal. I would expect the trade remedies authority to have a very good relationship with the Scottish When the TRA makes its proposal—which, Government and—I hope—the Scottish under the act, the Secretary of State for Parliament, and also with Scottish businesses and International Trade has the right to disagree with— consumers. we will ensure that it is sent to other UK Government ministers at the same time as it is The Convener: I will ask one final question. In sent to the devolved Administrations. Although the answer to my opening questions to you, you very proposal will be sent to the Secretary of State for helpfully said that you would have another look at International Trade, it might also have an impact how the Scottish Parliament might get more on the Department for Business, Energy and involved in scrutiny over new parts of rolled-over Industrial Strategy, or the Foreign, Commonwealth agreements in devolved areas. and Development Office due to international Could the trade remedies authority be looked at relations. At the same as it is sent to those again, to consider how it might be made more departments, we will send it to the devolved accountable, not to the Scottish ministers but to Administrations. That will happen once it has the Scottish Parliament—perhaps “accountable” is reached our secretary of state. The devolved the wrong word; I am asking whether the Scottish Administrations will be very heavily involved at all Parliament could undertake more effective scrutiny stages of the process of a trade remedy of the authority, where it is involved in devolved investigation. matters. For instance, would it be possible for the John Mason: I take your point that on an authority to lay a report before the Scottish individual investigation there could well be a Parliament when it is involved in such activity? At relationship. However, I wonder whether there least that would draw the Scottish Parliament’s would be a Scottish representative on the TRA

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attention to the activity that was going on and The scope and policy objectives of the bill that is provide an opportunity for greater scrutiny. before us today broadly correspond with those of the 2017 bill, but there is a significant change in Greg Hands: You make a fair point, convener. the area that gave us the greatest concern in The trade remedies authority’s annual report could 2017. perhaps be deposited with the Scottish Government and the other devolved The Scottish Government lodged a legislative Administrations, which would give the Scottish consent memorandum in December 2017, which Parliament the opportunity to scrutinise the TRA’s made clear that we could not recommend that the work. I am all in favour of your committee and the Parliament approve the bill as introduced. Our Scottish Parliament looking at how the trade main concern at the time related to constitutionally remedies authority is working; the best way to do inappropriate constraints on the Scottish ministers’ that is by having the TRA deposit documents so powers to implement provisions in devolved areas. that they are available for scrutiny by you, through The provisions in clauses 1 and 2 that constrained the Scottish Government. That is probably the devolved authorities’ powers have been removed. best way, procedurally, to enable that to happen. The Trade Bill’s purpose is to enable the UK The Convener: Thank you for coming to give Government to provide continuity for businesses evidence this morning, minister—we are grateful by continuing to benefit from trade agreements to you. Enjoy the rest of your day. that the EU had with third countries, to avoid a cliff edge for businesses that are competing Greg Hands: Thank you, convener—and thank internationally under the WTO’s agreement on you to the committee members, too. Government procurement, and to enable trade remedies to be pursued now that the UK has left 11:36 the European Union. Meeting suspended. Before I set out our reasons for recommending consent, it is important that I make clear that the 11:42 Scottish Government does not support the UK Government’s approach to trade policy, which so On resuming— far has excluded any substantive and meaningful The Convener: We continue with evidence on role for the devolved Administrations. the Trade Bill. I welcome Ivan McKee, the Scottish Irrespective of the extent to which UK trade Government Minister for Trade, Investment and policy engages with and impacts on areas of Innovation, and the officials from the Scottish devolved policy and competence, the Scottish Government who join him: Reuben Aitken is head Government has had no meaningful involvement of the trade policy division; and Francesca Morton in trade negotiations, nor has it had any input into is a solicitor. the identification of priority partners for trade Minister, I invite you to make brief opening negotiations. We do not support the UK remarks, should you wish to do so. Government’s intended light-touch approach to engagement with, and parliamentary scrutiny of, The Minister for Trade, Investment and trade agreements. Innovation (Ivan McKee): Good morning, convener and committee members. I hope that you can hear me. 11:45 The Convener: We can hear you fine. The Scottish Government is concerned by the absence of a statutory commitment by UK Ivan McKee: Thank you. I will take the ministers not to legislate in devolved areas without opportunity to make brief opening remarks and I first consulting—and, ideally, obtaining the will then stand ready to take your questions. consent of—the Scottish ministers. Although this is I am pleased to be here today to discuss the not a measure for which legislative consent is required, the absence of devolved Administration Scottish ministers’ recommendation that the involvement in the trade remedies authority also Scottish Parliament consent to the UK does little to reflect a collective approach to the Government’s Trade Bill, where consent is conduct and administration of trade investigations. required on limited aspects of the bill. The bill was introduced in the House of Commons on 19 March The wider context is that the UK Government 2020 and completed its second reading in the has left the EU against the will of the people of House of Lords on 8 September. Scotland and has also decided, in an extraordinarily reckless move, to end the Brexit The committee will recall that the Trade Bill that transition period during a global pandemic and was introduced in November 2017 fell at the deep economic recession that will inevitably cause dissolution of the UK Parliament in autumn 2019. huge disruption. Unlike the UK Government, the

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Scottish Government is seeking to do all that it can and long term, to protect Scottish interests. That to minimise damage to business and jobs. That is principle underpins the Scottish Government’s why we recommend consent to relevant clauses of approach to the bill. the bill, which, contrary to what the title suggests, The Convener: I start with approach and tone. is narrow in scope and largely technical. In the The tone from the Scottish Government is main, it seeks simply to maintain current trade somewhat different from the tone that we heard arrangements from which the UK has benefited by earlier from the UK minister, who spoke about—I virtue of its previous membership of the EU. hope that I characterise what he said correctly—a The provisions of the bill for which the legislative process of positive engagement with the Scottish consent of the Scottish Parliament is required will Government on this bill. In that light, how would enable full implementation of the rollover of trade you, as a Scottish Government minister, agreements from which Scotland benefited characterise relationships where this bill is through EU membership. They will insure against concerned? potential gaps in Scotland’s ability to access Ivan McKee: Minister Hands also said that, current and future procurement markets. although we have engagement, we do not always Withholding consent where it is required on the see eye to eye. That is true for the issues that you technical aspects of the Trade Bill would not are talking about. When it comes to meaningful benefit Scottish businesses or consumers. It is in engagement, we do not see eye to eye. We have Scotland’s interests to mitigate damage to existing frank exchanges of views when we meet. I am trade relationships, so it is our view that grateful to the minister for the fact that there is recommending consent is the appropriate way engagement and discussion, but that does not go forward, despite the fact that we should never far enough. It is one thing to have “wee chats”, as have faced this situation. Angela Constance characterised them, but there We will push for a greater role in the must be far deeper and more meaningful development and definition of UK-wide trade engagement. policy and arrangements, from the formulation of We have produced a paper that sets out the role mandates to the negotiation, finalisation and that we see for the devolved Administrations in implementation of trade agreements and that process, from choosing who the partners compliance with the enforcement of obligations at should be and setting up the negotiation mandate both domestic and international level. We want to to being involved through the three-room process ensure that those serve Scottish needs and that Mr Russell talked about for the negotiation interests, that they drive and support sustainable and implementation of the deals. We think that and inclusive growth and that they maintain strong that is good for Scotland and the devolved ties with the EU. However, we are under no Administrations and, frankly it is good for the UK illusion: the only way to truly protect Scotland’s and the partners with whom the UK seeks to interests—particularly given the UK Government’s negotiate trade deals. It is fair to say that the behaviour over the United Kingdom Internal sharing of information has been partial and limited, Market Bill—is to become an independent country and the level of engagement that we have had in and a full member of the EU. the process is not what we would have sought to We are also committed to publishing our trade have on behalf of Scotland. vision for Scotland before the end of 2020. That The Convener: As you know, under the Trade will set out our vision for trade and the principles Bill, rolled-over trade agreements could differ from and values that will shape the trading relationship the original EU agreements, but there is no scope that we want Scotland to have in the future. That in the bill for the devolved Governments or vision will underpin how we take forward the Parliaments to scrutinise any new aspects of the implementation of our three cornerstone agreements in devolved areas. You might have international economy plans on exports, heard the exchange that I had earlier with the UK investment and capital. It will reflect the Scottish minister on that. Government’s aims of fair work, inclusive growth, supporting the wellbeing of people and In its LCM, the Scottish Government calls for communities and making the transition to net zero. “enhanced procedures for parliamentary scrutiny and The vision will also include a set of indicators engagement with the devolved administrations”. against which future trade-related decisions, on both import and export, can be tested. What kind of enhanced scrutiny and engagement do you wish to see included in the bill? Now more than ever, as we begin to develop new policies and strategies to recover from the Ivan McKee: The issue is, of course, that the unprecedented and deeply damaging impacts of UK Government has not put anything on the face the coronavirus pandemic on our economy, it is of the bill that would require it to engage with us in important that we do all that we can, in the short devolved areas. That is clearly a concern. The UK

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Government has said that it intends not to do that, concerns have been removed. However, he said but we are concerned that it is not in the bill. that the UK Government will not “normally” use the powers without consent, and that phraseology Modern trade deals cover much more than worried me a little, because “normally” can mean trade. They impact on a whole range of areas, almost anything. Does the Scottish Government including many devolved areas, as we know. We have concerns about that? want the UK Government to face deeper scrutiny from the UK Parliament, and that is something that Ivan McKee: Yes. The view that we took was is being discussed at length at Westminster, and that, on balance, it was right to give consent. to have greater engagement with the Scottish However, one factor that weighed on our minds Government as I have outlined. The devolved was that there was no requirement in the bill to Parliaments should also have scope to be able to have consent for the use of the powers in input into the process and scrutinise the bills. devolved areas. We have pushed on that and gained commitments in that regard from Minister The problem is that, if we take the Japan deal Hands in writing and on the floor of the House of as an example, Greg Hands said that that is now Commons, but you are absolutely right about the going through legal scrubbing. We, as a devolved word “normally”. We have spent many happy Administration, have not yet seen the text of the hours debating the meaning of that word in Japan deal so, in the current environment, we are committee and beyond, and of course there are not in a position to comment on the detail of that concerns there. deal because we have not seen it. If we could see what has been negotiated, that would be a good John Mason: I also asked Mr Hands about the start for the scrutiny process but, as I have said, issue of timescales for implementing trade we want to be involved in the whole process right agreements. Five years plus an extension of five through from setting up negotiation mandates, years to 10 years seems quite a long time. What through the negotiating process, to the are your thoughts on that? Is it too long? implementation of the deals. Ivan McKee: To be clear, that issue is about The Convener: I hear what you say about the rolling over existing trade deals that the EU has Scottish Government not having seen the Japan made with third countries, so it is about deals that deal. You might not have not seen any of the text, are already in place. A number of those have but Parliament does not even know what the cover already been rolled over and a number of the key looks like. I pushed Mr Hands on that, but is there ones are still to be done, so we will see how those scope for discussion between the Scottish progress. Clearly, we hope that a lot of that work Parliament and the Scottish Government about happens quickly, because it allows businesses not how the Scottish Government could enhance our to have further disruption as a consequence of ability in the Parliament to scrutinise when it can leaving the EU. Of course, all this is caused by our the various arrangements around trade leaving the EU. If we were not leaving it, we would agreements? not be having this discussion. Ivan McKee: Absolutely. Work is being done on The length of time is there to catch those of the a protocol between the Scottish Government and 40-odd deals that could fall into a situation of the Scottish Parliament on how such engagement prolonged negotiation and discussion. We could and should work across a broader range of understand that it could take a lengthy period— areas. I would be supportive of that and I am very obviously, international trade deals can be keen that there is as much scrutiny as possible of complex. Of course, the issue is then about the future trade deals in the Scottish Parliament’s provisions in the bill that allow the implementation committees. of those aspects to be taken into domestic law across the UK and in devolved areas. The Convener: I am now going to hand over to Murdo Fraser. I apologise to him, as I should have We are not overly exercised about the issue, said that that was my final question. given the narrow scope of the bill. We understand that there could be a situation in which, for a small We seem to have a problem with Murdo number of countries, the process could be Fraser’s sound. I will move on to the next question lengthier than we would like. and come back to Murdo Fraser if and when his technical issues are sorted. John Mason: I confess that I would be concerned if we did not have those agreements in John Mason: I do not know whether Mr McKee place within five years, but I take your point. heard my earlier questions to Mr Hands, but these will be on similar grounds. The final issue that I want to touch on, as I did with Mr Hands, is the trade remedies authority. On the issue of the previous Trade Bill That is a new body and, as I said to Mr Hands, compared to the current one, Greg Hands was committees in the Parliament have a mixed very reassuring and said that all our problems and experience of dealing with UK bodies. Some of

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them do not have regard to the Scottish Dean Lockhart: Good morning, minister. As Parliament although, to be fair, others, such as the you know, the United States is the largest source OBR, have been very good. Should there be a of direct investment in Scotland, after the rest of Scottish representative on the trade remedies the UK, and is Scotland’s single largest authority, even though Mr Hands said that it is not international export destination market. Given the that kind of body, or should the authority be importance of trade and investment between required to report to the Scottish Parliament? Scotland and the United States, do you agree that What is your thinking on that? a free trade agreement with the US should be an important priority for the UK and Scottish Ivan McKee: We have pushed and argued on Governments? the TRA at every meeting that I have had with Greg Hands and his predecessors—he is the third Ivan McKee: Dean Lockhart is right to say that trade minister I have engaged with in my time as the US is the largest individual single-country Scottish trade minister. We have made the point market in terms of our exports and export clearly that we believe that the Scottish potential, and I know that he will have read in Government should have a say on a Scottish detail the export plan that we published last year, representative or provide input to a Scottish which highlighted that that was absolutely the representative who can understand the depth and case. Of course, the EU as a whole is a much complexity of issues as they relate to the Scottish larger export market than the US alone and context. In many ways and in many sectors, the presents more opportunities. context in Scotland is different from that across the The interesting point to recognise is that the rest of the UK. trade that we do with the US at the moment takes The UK Government has taken the position that place in the absence of a free trade agreement, that is not what it intends to do. We hope that the and there is plenty of potential and scope for engagement with the TRA will be productive and businesses to trade with the US. I visited the US constructive. However, frankly, it is far too early to around this time last year, and we continue to say how that is going to roll out. We are not as work closely with Scottish businesses with regard comfortable as we would be if there were a to exports to the US, and Scottish Development specific Scottish representative on the TRA. As it International provides us with a significant is set up, we will watch and engage with the infrastructure across the US to support those process so that we can understand what it will look export and investment opportunities. like. As we have demonstrated, we are perfectly capable of having significant export success in the 12:00 US and attracting investment from the US in the Greg Hands’s comments about our being absence of an FTA. The question is what value an involved in that process speak to some of the FTA would add. There are some potential upsides disconnect around how we all see the process. around the possibility of removing specific market When he said that, I checked with officials, and I access barriers to trade. You must remember that can confirm that the advert for recruitment for a lot of the activity in the US in the areas that we members of the TRA was shared with us, so we are particularly focused on involves services, and were involved in the process in so far as we were regulations in that regard are controlled at state, able to circulate that advert within Scotland so that not federal, level, which makes it difficult to access people here could apply for one of those positions. those opportunities. It is also important to However, that was the limit of our involvement. recognise the position that many Scottish products are in with regard to tariffs as a consequence of John Mason: I take your point that it is a new actions by the US that are problematic for Scottish body. Could you and the Scottish Government business. keep us updated on any issues or concerns that arise in relation to the TRA? Leaving aside the many issues that members would have concerns about, including the well- Ivan McKee: Absolutely, as we will do on all rehearsed ones around chlorinated chicken and other aspects of the bill and the wider trade access to the national health service, one of the agenda. largest issues that exercise us from a trade The Convener: Murdo Fraser has rejoined us perspective concerns things that the UK might following his connection challenges. Over to you, negotiate as part of a US FTA that would put Murdo. barriers in the way of our on-going trade with the EU. One of those areas involves data flows. We Well, I thought that he was back on. He seems have free data flows with the EU, but the US has a to still be experiencing problems. In that case, different regime in place for the management of Dean Lockhart can ask the next questions. data and there is a risk that things could be put in place that might be problematic for our on-going

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trade with the EU, especially with regard to have comfort that such issues are being taken on important sectors such as services, and financial board as part of the negotiations. services in particular. For example, the market access offers that the Dean Lockhart: I am glad that you, too, UK Government has made to the US through the recognise the importance of a potential free trade current FTA negotiations have been shared with agreement with the US. The programme for the US but not with us, so we do not know what is government that was published a few weeks ago in them and what the UK Government is putting on mentioned a potential US free trade agreement on the table. page 125. It said: Dean Lockhart: You have raised hypothetical “These proposals would force Scotland to accept lower concerns and have not pointed to anything in the food safety, animal health and environmental standards, free trade discussions that might lower standards. effectively imposed by a UK Government in pursuit of a US We heard from Greg Hands that the UK trade deal.” Government’s strategy is to maintain high What empirical evidence do you have for that standards, and, in the negotiation process, the UK statement? As we heard from our exchange with Government has said time and again that it will not Greg Hands, UK regulatory standards already go lower food standards or other standards in the UK beyond EU standards in many areas, including as part of a US free trade agreement. Do you health and safety, maternity and paternity leave recognise that your concerns might be and flexible working, to name but a few. There hypothetical? was absolutely no prospect of lowering trade standards or any other standards to secure the Ivan McKee: All concerns are hypothetical; that free trade agreement with Japan. Will you explain is why they are concerns. If we look at the the factual background for the statement in evidence, we see that the UK Government’s relation to a US free trade agreement on page 125 sharing with us of its negotiating positions and of the programme for government? trade-offs is not at the level that we want. The US has signalled that agriculture is the most important Ivan McKee: The key word is “agreement”. The issue and that it will require other countries to whole point of an FTA is that there is discussion to conform to its standards. Those issues are all on move both sides forward in an environment that the table. results in a deal being done. By its virtue, a deal involves give and take. As Dean Lockhart You can therefore see why we would have articulated, we are concerned that there are areas concerns. Clearly, those concerns can be allayed in which the US would push for access that would by the sharing of that information and by greater conflict with the very important requirement in involvement of us in that process. However, given Scotland and across other devolved areas to that landscape and those facts, it is perfectly protect standards. legitimate for us to have concerns. Why do we think that? Last year, I met people Dean Lockhart: That is all that I had to ask, from the Office of the United States Trade convener. Representative in Washington and representatives The Convener: I am crossing my fingers that of the US Government at its embassy in London, we will now go to Murdo Fraser. I hope that his and I have had other engagement with the US. We connection issues are completely sorted. have seen the signals and the messaging from the US, as well as its actions on tariffs, which were Murdo Fraser: Thank you, convener. I hope mentioned earlier. The US has made it clear that that you can see and hear me and that I am back its primary focus is agriculture, and standards are and reconnected. clearly different in that area. The US has also Good morning, minister. I missed some of the made it clear in its messaging that it requires to previous exchanges, so I apologise in advance if I export its agricultural products to its standards— go over some ground that has already been gone that is the US’s primary negotiating objective. over. When we take that in the round and consider I will go back to a comment that Greg Hands the communication from the US, we see that, at all made in the earlier evidence session. He said that, levels, agriculture is the most important area for when previous EU trade agreements—including the US. It wants any trade partner to conform to its with countries such as Japan—went through the standards, and not vice versa. Therefore, you can House of Commons, SNP MPs either abstained understand why we have concerns, not least by on or voted against them. Does the minister know virtue of the fact that the UK Government has whether that is true? If it is true, why did they take been very reluctant to share with us its negotiating that stance? mandate and the overall negotiation positions that it is taking with the US. That does not allow us to Ivan McKee: I am not sure about the specifics of that question. The devil is in the detail in those

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areas—in which Murdo Fraser is hugely time that he and the Scottish Government believe experienced. We would need to trawl back and that the devolution settlement should be look at exactly what proposition was on the table respected. Does the minister accept that the at the time and what the specific concerns about it devolved Administrations, including the Scottish were. Government, should not have a right of veto over UK trade policy or UK trade agreements? It is important to recognise that the deals that we are talking about were negotiated by virtue of Ivan McKee: We are not asking for a veto; we Scotland and the UK being part of the EU. All that are asking that, with regard to devolved areas, is really happening is that the UK Government is there should be due process that takes us into running to catch up, to get us back into the account. Our position is a legitimate one, given position that we enjoyed as part of the EU that trade deals now cover a wide range of negotiating power globally. Clearly, we are aspects and go beyond what traditional trade supportive of that, because the fact that we were deals covered in the past. Modern trade deals members of the EU allowed us to benefit from cover a whole range of areas that impinge on those deals, and we hope to minimise the already devolved matters, which is why it is only right and significant impact that Brexit will cause for proper that there is due process in those aspects Scotland. for the Scottish Government and other devolved Administrations, and that the devolved Murdo Fraser: The minister will appreciate the Parliaments have their say in that process. reason that I asked the question. He is telling us that he wants to see those agreements rolled over, that he views them as important and that he wants 12:15 to have more of a say. I am simply interested in Patrick Harvie: I find your position on the bill a whether he sees the irony in the fact that we are bit bewildering, minister. Even in your answer to talking about agreements that his own colleagues Murdo Fraser about your modest asks in relation at Westminster either abstained on or voted to a role in respect of devolved competence, your against. If those agreements are so important position sits completely at odds with your now, why was it not important to support them recommendation that the committee should give when they were entered into? consent to the bill. Even in relation to devolved Ivan McKee: I will say again what I said before, competence, the bill does not address the which is that we would need to go back and look concerns that the Scottish Government seems to at the detail of that. No trade deal is perfect—there be setting out. are always aspects that we want to be improved. The bill could—but fails to—establish an input However, I draw a distinction because you are for the devolved Administrations or Parliaments on talking about those deals when they were the setting of negotiating mandates. It could—but negotiated originally, and we would need to go fails to—provide for devolved, or even UK, scrutiny back and look at the specifics. I am sure that there of negotiating texts and the various iterations of a would have been areas in relation to which we trade agreement as it is negotiated. It could—but would have argued that more could have been fails to—give the devolved Parliaments the ability done to protect and promote Scottish interests. to say yea or nay to the devolved aspects of a With regard to the Trade Bill, there are concerns trade agreement once it has been signed off by in the devolved remit that we have articulated the UK Government. It does not do any of those clearly. We have also articulated concerns at things. Why should we agree to it? Westminster in relation to parliamentary scrutiny Ivan McKee: It does not do lots of things, but and so on. This is by no means a perfect that is not the bill’s purpose, which is clear and scenario—we have concerns about it, which we narrow. There are many things that you and I have raised. Nonetheless, considering all the other could say would be good things to load on to the things that would flow from there not being bill. consent, on balance, the marginal decision of the Scottish Government has been to take the position The purpose of the bill is clear: it is to enable the that it makes sense to give consent to the bill at continuation after the Brexit cliff edge of the deals this time. with third countries that we benefited from as a member of the EU. That is its primary purpose, Murdo Fraser: Perhaps the minister might write along with allowing the UK and Scotland to be part to the committee subsequently with an answer to of the WTO GPA and to access procurement that question. opportunities. The bill’s purpose is to ensure I will ask one more question. We heard from Mr continuity with those trade deals, to enable us to Hands—and we have heard previously—that trade avoid falling off another cliff or to make the fall policy is a reserved matter. We have also heard slightly less impactful, as we go through the Brexit from a lot of the minister’s colleagues over a long process.

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What else we could get in those trade deals, consequences—your suggestion that there is what other trade deals we could do and what our nothing to see here, that nothing will change and wider trade policy should and should not include that it is all just about continuity—depends entirely are much bigger issues, and I am sure that there on trust and on the good will of a UK Government will be a lot of common ground when we engage that has already committed to breaking on those matters. However, the Trade Bill is international law in respect of its ideological narrowly focused on the trade deals that we agenda and that has already legislated in benefited from due to our being a member of the devolved areas without the consent of the Scottish EU, and its purpose is to ensure that no further Parliament. Indeed, it did so despite the explicit damage is done as a consequence of the Brexit refusal of consent by the Scottish Parliament. Why process and our no longer having the benefit of on earth should we take the UK Government at its those EU trade deals. word? Patrick Harvie: Just a few minutes ago, you Ivan McKee: The Trade Bill is clearly focused complained that the Scottish Government has still and it is explicitly about rollover deals. That is what not seen the text of the agreement with Japan. it is—that is what it says, and that is what it is all Even in relation to the bill’s narrow scope about. It is about ensuring that the benefits that we regarding the range of countries that it will directly have through membership of the EU from the affect—notwithstanding any precedent that it sets deals that it has negotiated on our behalf with third for the future approach—and even purely in countries continue, as well as the WTO part that relation to the devolved competencies, it is clear we have spoken about. That is it. Therefore, I do that the bill largely and significantly fails to achieve not understand the question. Is the member the role in devolved scrutiny and accountability saying that we should not believe anything that the that your Government says is necessary. UK Government tells us or that we should not believe that what it has written in legislation is Ivan McKee: You must remember that these what it is going to do? Clearly, we have to proceed trade deals are already in place; they are not new. on the basis of what is written in the bill—we might They are trade deals that were negotiated by the like it to be different but it is what is—and the bill EU and that we have had the benefit of—some for says that it enables those deals, as they exist at many years. We are, in effect, preserving where the moment and as the EU negotiated them, to be we are. rolled over so that we can continue to get the We have concerns about the bill, and we have benefit of them. articulated those concerns. There are, of course, We all agree that it is good to be a member of lots of things that we would love to have in a the EU, and we are comfortable with the EU broader trade bill. However, the bill that we are negotiating deals on behalf of its 28 members. We discussing has a narrow focus and is of a might not agree with all the details, but, by and technical nature. It is about ensuring that we do large, we are comfortable with that position, not take a step back with regard to the benefits because that is the position that we would be in that we enjoyed as a member of the EU through were we to stay in or seek reaccession to the EU. the trade deals that the EU negotiated with other All that is happening is that those trade deals will countries. That is its scope. Not consenting to the continue to apply to the UK and Scotland post- bill would open up a range of technical aspects Brexit. that would have to be put in place through legislation to ensure that Scotland continued to Patrick Harvie: That is despite the fact that the benefit from those deals, and likewise with the bill does not give a devolved role, either WTO GPA. parliamentary or governmental, that you say is necessary. It is important to understand the issue in context. We can have a discussion about trade Ivan McKee: As I said, it is not ideal, but the and talk all day about all the great things that we question is whether we continue to benefit from would love to happen. We would love to do that, those EU deals. As I said, the primary concern but the LCM on the UK Government’s Trade Bill is that we had, which was about restrictions on the very narrowly focused. It is about the technical power of the Scottish ministers, has been aspects and ensuring that we do not take a step removed. We would have liked something in the back from the benefits that we enjoyed as a bill about the devolved competences, but we have member of the EU through those third-party trade had a written agreement on that, as well as oral deals. It is no more than that—that is what it is. agreement on the floor of the House of Commons. We have concerns about it, but, as I said, on That is where we are. I see that Patrick Harvie is balance, not consenting runs the risk of our taking laughing but, at the end of the day, we have those a step back. deals in place, having been a member of the EU, Patrick Harvie: It seems to me that your and we are perfectly happy with them. After interpretation of the bill and its potential reaccession to the EU as an independent country,

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we will again be perfectly happy with the deals as relationships, particularly with the EU? The they are. In the intervening period, when we are minister may have heard some of the evidence not a member of the EU, we support the rolling that the committee heard last week about over of the deals so that they continue in their concerns being raised in the United States present form and we continue to benefit from Congress about consequences for future trade them. That is it. As I say, there are plenty of other with the UK if we trash the Good Friday things that I would like a trade bill to be about, but agreement. that is not what this bill is about. Ivan McKee: Many of those issues are much Alexander Burnett: You must be relieved to broader than the scope of the Trade Bill LCM, but hear that countries such as Japan still trust us, thank you for raising them. I saw, from a number and you must be delighted that the trade of sources, the comments that were made in the agreements are progressing for the benefit of US on the situation in which the UK Government Scottish businesses, not least through the massive has found itself as a consequence of its cavalier expansion of protected geographical indications. approach to international agreements. Leaving aside the rollover of the 40 EU-held The comment that countries such as Japan still agreements and a deal with the EU, which three trust us has been made a couple of times during countries would you like to prioritise agreements the meeting. That is a fairly low bar, and not with first? because it is Japan. The fact that we have not yet Ivan McKee: I will first talk about the Japan trashed our relationship with everybody is a fairly issue, because there are some points that are low bar to aspire to. worth picking up. Greg Hands referred to the issue The issue is a huge concern. Much of the in answer to earlier questions. On the point about process is based on trust and relationship building. geographical indications, the reason why only a That allows you to do deals and go through the handful of GIs were in the EU-Japan deal was complicated negotiating process over a long that, despite our exhortations to the UK period, to put in place deals that will benefit Government to do differently, it did not put forward business, consumers and wider society. It is of GIs to the EU to be included in the deal. That was concern that the UK Government is knowingly a complete failure of the UK Government to deliver putting itself in a position in which it is seriously on behalf of Scotland. putting at risk that good will and trust, and I raised Greg Hands mentioned financial services in that issue directly with Greg Hands in our most relation to the Japan deal. I will read out the recent call. information that I have here on the UK-Japan deal. The Convener: As no other member wants to It says: contribute, I thank Mr McKee for his evidence. “The deal creates an annual dialogue between Her That concludes our business for today, so I now Majesty’s Treasury, UK financial regulators, and the close this meeting. Have a good day, colleagues. Japanese FSA that will explore ways to further reduce regulatory friction”. Meeting closed at 12:29. That means that, once a year, they are going to sit down and have a chat about what they might be able to do to reduce friction. That is the extent of the tremendous benefits that allegedly are in the UK-Japan deal for Scotland’s financial services. To answer the question on trade deals, the answer is the EU, the EU and the EU. That is our biggest market by far. “A Trading Nation—a plan for growing Scotland’s exports”, which we published last year, showed that 12 of the top 15 countries for exports are in Europe, and we can add in the 40-odd countries with which the EU has existing trade deals that we are scrambling to replicate. From that, it is clear that our future is as a member of the EU, benefiting from the negotiating power, the approach and the deals that it can deliver on our behalf. Angela Constance: How important are the touchstone issues of trust, reputation and always being prepared to uphold international law in establishing future economic and trading

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